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Technology Stocks : TAVA Technologies (TAVA-NASDAQ)
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To: kfdkfd who wrote (27489)2/6/1999 5:12:00 PM
From: Karl Drobnic  Read Replies (2) of 31646
 
Open interest in all calls is 5,325. That is equal to 532,500 shares. So that may explain some of the short interest. Note that August '98 was about the time TAVA options began to trade. So we can look at it this way. Suppose lots of TAVA investors have decided to write covered calls against their long stock positions. That forces the specialists to be long the calls. They need to hedge their positions. One way is to sell puts. But there just aren't very many open puts. Another way to hedge is to short shares in various ratios to maintain a "delta neutral" position, the math of which is complex, but which locks in a small profit if followed to the last decimal place. So to the extent that the public is writing covered calls (a tactic I've encouraged), specialists may be forced into shorting shares to maintain an orderly options market. Thus, this would not be a "short attack" in the making, but an orderly process working itself out.
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