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To: pater tenebrarum who wrote (56177)	1/10/2001 12:36:09 PM
From: jj_	Read Replies (1) \| Respond to of 436258

QQQ... Bernie Schaeffer: Overhead Call Open Interest on the Nasdaq-100 Trust (QQQ) 1/9/2001 4:59:49 PM There are a few possible implications of the current Nasdaq-100 Trust (QQQ – 57-1/4) call open-interest configuration. Within the front-month series, the top three call open-interest totals are as follows: 60 ---- 75,915 contracts 65 ---- 45,820 contracts 70 ---- 51,449 contracts The actual peak open interest strikes can often behave as support and resistance levels. We will focus on the resistance level that the peak open interest at the QQQ 60 call strike offers. There are three reasons that call strikes with large open interest can act as resistance: A large amount of open interest can define a point of extreme market optimism that usually coincides with the depletion of buying strength. When this strength has been depleted, it takes less selling activity to change market direction. The individuals who sold these call options to speculative investors may be long the stock synthetically to balance their bearish position from selling the options. These long positions will ultimately be sold when the options expire or when the call buyers unwind their positions. Call sellers that do not hedge their position will try to resist the market as it approaches the strike at which they sold to protect themselves from losses. However, a rally above the 60 strike could result in a major delta-hedging surge. If a sharp rise in the QQQ allowed resistance at 60 to be penetrated, the market makers who are short the calls would have to buy QQQ shares to cover their short call option positions. This situation could create an explosive rally because of the activity required to hedge the rising value of short call option positions. If these QQQ options speculators (at the January 60 strike) are call buyers, then the hedging of long stock by the call sellers will get less and less necessary as we approach expiration a week from Friday, provided the QQQ remains below 60. This means that there will only be natural QQQ selling over this period. If these are call sellers, we view this bearishly, as they are likely selling calls to "protect" themselves rather than buying puts, which indicates complacency about the potential weakness from here. The recent behavior of the QQQ is consistent with this heavy overhead call open interest - sharp rallies in the trust (see the arrows in the attached chart) have been stimulated by call sellers needing to add long QQQ exposure. The QQQ then swallows gradual declines (see the daily chart below). Chart courtesy of ILX Systems By way of comparison, the peak out-of-the-money put open interest is only 23,044 at the 55 strike. The chart below from Schaeffer's Daily Sentiment illustrates the bias speculators have shown toward front-month call positions (blue bars signify call open interest, red bars illustrate put open interest.)

To: pater tenebrarum who wrote (56177)	1/10/2001 12:37:23 PM
From: yard_man	Read Replies (1) \| Respond to of 436258

XAU buy negated yet??

To: pater tenebrarum who wrote (56177)	1/10/2001 12:38:34 PM
From: AllansAlias	Read Replies (2) \| Respond to of 436258

Maybe. Too early to tell. Did you see how quickly that fell. That was a little more than profit-taking. I am out now because I got scared by the strength of the bounce. (Those who are not amused by Elliott should skip this... The short t-f bullish scenario is that Fed-panic is 1, retrace for a 2, and start of the 3 off the 8/9 low. So, we had a 1 off that low, a retrace for 2, and today we are starting the 3 of 3. Further, this morning's leg could be seen as a 1 of this 3 of 3, and now we do a little fooling around for a 2, then this afternoon we go freakin' balistic with the 3 of 3 of 3. Got that? -g Folks, we're just having fun here. Anybody who trades using this information as the primary tool is gonna get destroyed.)