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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: Kevin Shea who wrote (8379)	6/17/1999 4:44:00 PM
From: bglad	Respond to of 57584

Re: Triple witching Friday. Here's an intriguing excerpt from a piece written Wednesday on TheStreet.com regarding tomorrow's triple witching: Always a recipe for volatility, witching this Friday has seen an interesting situation arise: There is a substantial amount of open interest in near-the-money June S&P 500 options, particularly in calls north of 1320. It's clear how the situation arose. For one, many investors are nervous and have lightened positions as a result -- but they don't want to miss out entirely if they're wrong. To hedge positions, they bought calls. "It makes sense that there has been a decent amount of interest in nearby strikes," said Rick Santelli, vice president at Sanwa Futures. "Equity traders are very smart to move their risk into the options arena -- not because it's safe, but because it's safer." Furthermore, stocks have been basically rangebound since March. Betting that this range would continue, some investors have actively written (sold) calls toward the top of the range and puts toward the bottom. Because stocks have lately threatened the bottom of that range, it looks as though many of the writers bought those puts back. As a result, there's less (though still substantial) open interest in near-the-money puts. Also, a large amount of the existing open interest is at 1275 -- a support level that hasn't broken since March. (If that breaks, however, look out!) If stocks rally off a good CPI or a less-than-hawkish Greenspan, near-the-money calls are going to turn into in-the-money calls. Anyone who wrote them will be forced to cover before they expire. Call-covering could send the index higher still, tripping past key resistance levels and sending the next tranche of near-the-money calls into the money. And so on. Thought this might be of interest to some of you. bglad