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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: t2 who wrote (29107)	2/10/2002 9:17:42 PM
From: mishedlo	Read Replies (3) \| Respond to of 99280

I am not trying to confuse you. Let's try this. Delta hedging (shorting by the sellers of puts to consumers) could kick in big time if the QQQ drops any time this week below 35. Since we closed so strong on Friday I doubt that will happen. There are a ton of puts in the money right now relative to calls. Thus I anticipate a rise this week. If instead we breakdown, then the sellers of the puts will short enough stock QQQ's to make sure they did not lose their ass to the puts holders. All things considered the option sellers would rather collect all of the option pie (max pain) as opposed to only half of it. That point is QQQ 37 1/2 where the most combined options would expire worthless. It was hard to say for sure how this week would play out until the rally late friday. It now seems the intent is to rally us back to maximum pain (about qqq 37 1/2) to expire the most options as possible worthless on a combined basis (puts and calls). Had we broken 35 to the dowside and stayed there on Friday, I would have suggeted that the powers that be delta hedged by shorting (and would drive the market further down) then cover at better prices after expiry. All the call options would expire worthless but the MMs would be short enough stocks to protect the puts they sold. When the MMs delta hedge, either lonng or short, it intensifies any move that is taking place. We saw that effect in Oct and November. Tons of call buying and the call sellers did not lose their ass as you might expect. They collected 100% on the puts side and "protected themselves" by going long so they did not lose $ to the call holders. All things considered the powers that be would just assume pin everything to max pain, but if they can not do that the delta hedging in one direction or the other intensifies the move. WOW I hope this helps cause I am not sure I cam explain it any better. M