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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Ira Player who wrote (7138)3/22/1998 5:11:00 PM
From: VincentTH  Read Replies (1) of 14162
 
Ira,

The following "proof" is taken from OPTIONS published by the CBOE:
The following positions are equivalent at expiration:

Long Stock == Long Call + Short Put.

That's because a move of the stock in either direction yield the same
result for both positions.

If follows that
Long Stock + Long Put = Long Call

So when the MM buy the call from you, in order to maintain
equilibrium w.r.t. market movement, the MM also buy the put
and the stock.
That explains why at triple witch Fridays, stock tends to
go down as people tries to roll their expired calls forward,
thus forcing the MM to sell the stock and the puts, thus
bringing the stock down.

//V
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