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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Bob Childers who wrote (14638)	9/16/1999 5:39:00 PM
From: Rich Wolf	Read Replies (1) \| Respond to of 27311

Hi Bob, Well, on the day it occurred, what was seen was a sale of 700 September 5 call contracts, and a purchase of 700 December 5 call contracts. On the surface, it would appear to be a normal 'rolling forward' of the contracts (what I'm told is called a 'rollover spread'). Pretty sizeable, but for a good commission, the client's broker is probably motivated to make a deal with the options market maker. If there is a good enough spread between the two premiums, it's doable. I believe INVestor noted this trade, and speculated such a rollover. However, one would expect to see the number of open contracts for the Sept 5 calls decrease by 700 the next day, and the number of open contracts for the Dec 5 calls increase by 700 the next day. Looks like the former did not happen, but the latter did. The question then becomes, what happened in the case of the trade for the Sept 5 contracts? The theory put forth here seems to be that the sale of the 700 Sept 5 calls to the bid price was not made for the purpose of closing the contract, but was actually a 'sell to open.' At the receiving end was a bidder who offered to 'buy to open' the same quantity, at the same price. The price and quantity match, so the deal is done. Since we didn't see 700 new contracts open either (we didn't see an increase in the open interest by 700), these contracts would have had to have been exercised the same day, and closed out. The net effect of this: the seller has transferred 70,000 shares of common to the buyer, at a price of 5'15, without trading through the stock market (and hence without moving the price). Who would want to do this? Speculation would have to be that two parties needed/wanted to transfer this many shares, and wanted to do it outside the market. There are probably other ways to do such a transfer. Then there is the additional problem: without a compensating sale of an equal number of contracts, how was the purchase of the 700 Dec 5 calls effected without moving the price substantially? With all the chicanery behind our stock's price movement, and with a hedge fund possibly involved, I'd think they'd be active in the options markets. That's what hedge funds normally do.