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Technology Stocks : Dell Technologies Inc.
DELL 129.98-6.2%Dec 12 9:30 AM EST
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To: Chuzzlewit who wrote (72835)10/18/1998 6:58:00 PM
From: Eddie Kim  Read Replies (1) of 176387
 
Let's say the MM wants the stock to go up:

MM SELLS puts and BUYS Calls. They don't buy both or sell both. Thus, the MM wins with both option positions if the stock goes up.

Second, since 95% of all options expire worthless and the large firms are writing most of them they make money every month. Let say a large firm has sold a lot of DELL 65s. Under normal conditions it is to their advantage to keep the stock below $65. I don't know the exact dynamics of this operation, but I'm sure the firms know how they can make the most money...either keeping it under $65 or letting it rise above.

Third, MMs or whoever are not always successful at this game. I have seen many times when DELL has busted through option prices and left option writers holding the short end of the stick. However, on days when DELL or whatever stock really isn't moving due to fundamental news, I believe MMs or whoever can nudge the stock a certain way.

Finally, take a look at the closing prices of DELL and CPQ on option expiration. One will see, consistently, that both of these stocks normally closes below some option strike price with LARGE open interest. Coincidence? Coincidence doesn't exist on WALL STREET.

That's all I know and I can't give you some specific examples. Maybe someone else can. I am quite certain that what we've been discussing does occur. My friend seemed to apply that it was a no brainer that it happens all the time. In fact he said it wasn't rocket science.
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