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Technology Stocks : CMGI What is the latest news on this stock? -- Ignore unavailable to you. Want to Upgrade?

To: DAX KIMPO who wrote (16819)	2/27/2000 8:06:00 PM
From: ZenWarrior	Read Replies (1) \| Respond to of 19700

nihil/DAX: Options just aren't that simple. The strategies get so complex on BOTH sides of the trade, that to make a conclusion on stock demand just doesn't cut it. And there are certainly Calls out there which are not covered at all... neither by stock, nor by other Calls. MANY pros, hedge funds, etc. write naked Calls (uncovered by anything), but do so across a broad spectrum of stocks, and likely write Puts at the same time. They don't need to buy stock, as they are merely after the option premiums... and certainly a person BUYING the Calls don't need to buy stock. It's a very complex system w/ just a broad range of strategies in place... spreads, straddles, covered calls, strangles, naked Puts/Calls, etc., etc. - Zen

To: DAX KIMPO who wrote (16819)	2/28/2000 1:35:00 AM
From: nihil	Respond to of 19700

Did the open interest in calls go up, indicating that market makers sold more calls (and may have hedged them)? The change in relative prices between calls and the underlying occurs all the time, and does not require any changes in the open interest in options or in outstanding stock. All that is necessary for a call price to rise and the underlying to fall is a shift in someone's expectations or time preferences. When I expect the market price of a stock at option expiration to be above the current option price (plus strike) I buy the call (from "someone who disagrees" with my guess). Fully invested and at the margin, I will have to sell some of the underlying to finance my purchase (I wouldn't sell anything else because ex hypothesis it is only this stock (arguendo CMGI) for whom my expectations or preferences have changed. Of course, I have a day to finance the purchase of my call -- so there is some leeway or wiggle room. The temporary creation or destruction of money through the transaction loan and margin loan process allows prices to accommodate or diverge from those implied by the strict accounting of the quantity theory of money. Interesting observation, though.