Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: gene_the_mm who wrote (825)	8/27/2000 10:51:02 PM
From: dannobee	Read Replies (1) \| Respond to of 1426

Open interest is the number of contracts in a given class (calls OR puts), and series (same strike price and exp date) capable of being offset by closing transactions at a given time. It's the total number of short OR long positions (not the total of both). Hope this helps Danno

To: gene_the_mm who wrote (825)	8/28/2000 5:17:55 AM
From: Louis V. Lambrecht	Respond to of 1426

Gene - Open Interest Since you left that question open, here is a part of the answer. Lost a good link in my infoglut, so trying to reconstruct it here. (And as usual, found the best info on CBOE). cboe.com >>>What is the OCC? The Options Clearing Corporation is the sole issuer of all securities options listed at the CBOE, four other U.S. stock exchanges and the National Association of Securities Dealers, Inc. (NASD), and is the entity through which all CBOE option transactions are ultimately cleared. As the issuer of all options, OCC essentially takes the opposite side of every option traded. Because OCC basically becomes the buyer for every seller and the seller for every buyer, it allows options traders to buy and sell in a secondary market without having to find the original opposite party. The OCC substantially reduces the credit risk aspect of trading securities options as the OCC requires that every buyer and every seller have a clearing member and that both sides of the transaction are matched. It also has the authority to make margin calls on firms during the trading day. The OCC has a AAA credit rating from Standard & Poor's Corporation.<<< Leads me to say that all trades are balanced, buy an sell side. >>>What is open interest? Open interest refers to the number of outstanding option contracts in the exchange market or in a particular class or series.<<< A word about volumes: it is not possible, within a day, to know if the volume (matched through the OCC) will add to open interest. Some contracts could be unwind (more volume, but lesser OI), some can be roundtrips (only volume, no change in OI).... As a result, Open Interest can only be calculated after the trading day. As a result, open interest is te number of outstanding contracts from day-1. I believe this is calculated by the OCC. (This is this item I would have liked to confirm, but it does not really matters to know precisely who makes those calculations.) Some other differences in the role of an MM at the CBOE: >>>What is a market-maker? Market-makers provide liquidity in option trading by risking their own capital for personal trading, and are the backbone of the CBOE's trading system. They take the opposite side of public orders by competing in an open outcry auction market. Floor brokers, on the other hand, act only as agents, executing orders for public or firm accounts. >>>Does a "specialist" buy and sell options? Most option classes listed at the CBOE are traded in an open outcry system where certain members of the Exchange may trade as market-makers. Market-makers provide liquidity in option trading by risking their own capital for personal trading, and are the backbone of the CBOE's trading system. They take the opposite side of public orders by competing in an open outcry auction market. This differs from the trading environment on many other exchanges where "specialists" are allowed to accept orders from the public, to manage the public order book and to deal for their own accounts in the same securities.