Ascend Communications (ASND) Message Board

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Technology Stocks : Ascend Communications (ASND)

ASND 209.41

-0.3%

12:16 PM EST

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To: Glenn D. Rudolph who wrote (38071)	3/6/1998 1:06:00 PM
From: Sowbug	Read Replies (2) of 61433

Glenn, I can't remember whether you're the one who was talking about how the open interest for options tends to predict what the closing price will be on the day of options expiration. Maybe it was Gary. Anyway, can somebody explain why that works? I know that if I write a call, I am bearish on the stock and I will probably not buy it, so you can extrapolate from that that for every written call there is another bear out there. Yet at the same time, there must have been somebody who bought that call, meaning that there is another bull out there. So it seems that the two cancel each other out. The thing that I am struggling with is that open interest seems to be a function of the likely closing price, rather than the reverse. If we are relying on an effect as if it were a cause, then it seems like it's a fallacious indicator.

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