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Technology Stocks : VLSI Technology - Waiting for good news from NASDAQ !!!
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To: Captain James T. Kirk who wrote (3213)3/20/1998 5:20:00 PM
From: DanZ  Read Replies (3) of 6565
 
Capt.,

I don't see why anybody had an incentive to keep VLSI below 17.5 today. As of the close yesterday, there were only 108 open March 17.5 calls and 602 open March 20 puts. It seems to me that if somebody wanted to manipulate the stock, they would have wanted it to finish at 20 so the March 20 puts expired worthless. Why go after a measly 108 calls when you can go after 602 puts? Not only that, but even if the same person was short all 108 of those calls (which is unlikely), that only represents 10,800 shares of stock, hardly enough buying power to influence a stock that trades over 1 million shares a day.

A better explanation for what happens on expiration day is based on psychology. Since many people believe that stocks finish at the nearest strike price, there could be more demand than supply below the strike price and more supply than demand above the strike price. These forces would tend to drive a stock towards the nearest strike price. Of course this assumes that the stock is trading close enough to a strike price and in the absence of news that might also influence the supply/demand dynamics.

The stock popped on the open this morning which I believe was due to options expiration. Unfortunately it didn't make it through resistance at 18 1/4 and fell back to test support at 17 1/4 again. It held well and bounced into the close on decent volume although I didn't see any blocks. The buys were mostly 5k shares each. I feel strongly that if VLSI closes over 18 1/4, then the trend will change from down to up. If if closes below 17 1/4, there is risk to 16. And if it closes below 16, then there is risk to the lower weekly bollinger band at 15. Which way it goes is anybody's guess.

Dan
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