PDG, *sometimes* a stock will get "pinned" to the nearest strike price (in this case, 40) the last couple of days going into expiration. This is more likely to happen if there is a large open interest in the options.
The reason for this is NOT manipulation, but as a natural side-effect of option expiration. There are two factors:
1. Arbitrage that can be done when/if the options trade at a discount to their intrinsic value near expiration. If there are call options trading at a discount, the calls can be bought, immediately exercised, and the stock sold for a small profit. (Normally this is done only by brokers and others with very small transaction costs.) The selling of the stock puts downward pressure on the price. Conversely, if there were a large open intersdt in puts, the opposite could occur, and the stock price could get a boost.
2. As the options approach expiration, if the stock is near a strike price, the potential profit in a newly-established option position in the expiring options from any move in the stock approaches infinity. Greed and fear move in to correct this. :) |
