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Strategies & Market Trends : Tech Stock Options
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To: AlienTech who wrote (58258)12/9/1998 12:21:00 PM
From: Daflye  Read Replies (2) of 58727
 
Agreed, for example, October 15th, for option writers was as much of a "crash" as any downside move would be for the retail people. When AG announced the intermeeting rate cut, alot of call options that would have expired worthless suddenly had value. Market makers, esp in the indexes had to buy stock to cover, which only added to the upside move. The biggest short squeeze of the year. I think. heh heh heh.
Market makers tend to write naked options. There is alot of probability/stats work that goes into pricing options. Most short term/out of the money options go out worthless (I've read that its about 90%). Thats where they make the money to cover the few that cost them money. There is a thread called "Max-Pain" I believe. I had the link at one time but in a fit of bookmark cleaning I zapped it. It charts where an equity might close on expiry to nullify the most option contracts.
The run from Oct 8th on has probably been aided by forced covering, market makers are/where getting creamed on most things tech/internut.
Darin
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