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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (100793)	3/29/2000 6:26:00 PM
From: Joe NYC	Respond to of 1575020

ted Then Joe, I don't understand. When someone is shorting and has to cover, usually the stock price goes up. From what you are saying in options, its different....that the action of the shorts causes the price to go down. Hmm. Good point. Maybe I goofed about the shorts. Maybe most of the short positions in options are covered to begin with and maybe it's the long caching in that drives the price. In addition if MaxPain is $30 now and was $40 last month...its looks as if investors have become bearish re AMD. Given the news coming out, you would sentiment would be just the opposite. On this, my opinion stays the same. The more calls are bought (compared to puts), or more accurately, the higher the open interest of calls compared to puts, the lower the MaxPain number. This is just based on the MaxPain formula. Whether the theory (that the stock price will tend to move in direction of MaxPain number prior to expiration) is valid is a question, as is the correct explanation of this movement. Another question is how accurate is the put/call ratio as a predictor of the stock movement. It seems that the option investors are very bulish about the prospects of AMD. Are they a good predictors of the future? I have a few option myself, but they are Jan 2001 expiration. I mostly have common shares. I tend to stay away from buying short term options (if anything, I prefer to write them). With short term options, you are not only facing odds of being right vs. being wrong, you have to be right about the time frame of the move, and you have to pay the carrying cost of the position of the option writer (built in the price of a call option). Joe PS: here is an example with explanation from the MaxPain website: ez-pnf.com