Could it be the options coming off today?
I remember seeing an analysis of how stock prices seem to move toward the point where the most calls and puts will expire worthless. Here is a description of MaxPain from the site,
pipeline.com
I haven't done the analysis described so don't take this effect as truth for this stock..
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There is a Wall Street axiom that says "90% of all the options that are bought and held to expiration will expire worthless". This means that 90% of the time the people who 'write' the option and collect the premium, never get their stock 'called' from them or get stock 'put' to them.
This has also been called the theory of maximum pain or just Max-PainT, for short.
There has been some analysis of this hypothesis in Silicon Investor discussion boards, eg Trading IOMEGA based on technical analysis. There are also extensive discussions of this effect, also called 'strike price pegging', in the archives of both Jim Cramer's "Wrong!" column and the "Saturday Options School" column at thestreet.com
By looking at the price of the underlying issue, on the last trading day before option expiry, (Note: options officially expire the day after the third Friday of the month.) it has been seen, with statistical significance, that the closing stock price tends toward the option strike price that forces the greatest number of options to expire in a worthless condition.
Whether this tendency is deliberately caused by some conscious effort at market manipulation or is just a result of some natural law of supply and demand is not obvious to this analyst. It is significant, however, to be aware that this does seem to be a tendency that occurs during those times when there is not some major market upheaval, price momentum, or breaking news relative to the stock in question.
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Another explanation- shorts decided to cover on this Friday. I hope it isn't another dead cat bounce. A strong close would really help, and large volume on Monday without a drop would confirm we have a bottom here.
How about some news RCN! Tell us you have more customers! A growing network! Tell us you'll hit expectations or better them!
Al |
