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Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (12485)	7/15/1999 10:24:00 PM
From: E. Davies	Read Replies (2) \| Respond to of 29970

OT is there another good reason that tech stocks always seem to retreat right before option expiration? I have been working for several years to understand the mechanisms behind how options expiration affects the stocks. So far I've not gotten it down, but I have pretty much convinced myself that it occurs as a natural market mechanism, not some deliberate plot. It has to do with how large holders (long and short) of options behave in hedging their positions with stock. Of course it is the options market makers doing most of this hedging, that is their job as part of providing a market in options. It is somewhere in this kind of vein: When you are short a call you go long the stock as a hedge. When expiration nears and calls that are out of the money look to be expiring worthless you sell the stock since you no longer need the hedge, this tends to drive down the price of the stock. I'm not sure if that is the mechanism, I only know it is something like that. Opinions welcome! I'm very interested in solving this mystery. If Ahhaha is still around he would know this mechanism exactly. Eric