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.

Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: The Freep who wrote (51054)	8/23/2002 1:19:12 AM
From: mishedlo	Read Replies (2) \| Respond to of 209892

FWIW, one thing I've noticed in looking at the option interest in some of the tech big caps like INTC and CSCO is that the preponderance of calls is at levels we are just at or nearing now (CSCO 15, INTC 20, QQQ 26, MSFT split between 50 and 55). Yes. Exactly. At this point I want to see a huge gap up that just sits there all day and goes nowhere but sideways. Undoubteldly that will mean shorting at a distribution top. Perhaps we saw that today but not sure. Take a look at CSCO CSCO is well well above max pain at 12.5. The OCT 17 1/2 ITM puts look attractive if you think that pig has any decent chance of falling to max pain. Even if it stays at 15 for a while, you should be OK for a bit. The put buying in September is minimal all around. While I think this might put a cap on any rally, the lack of puts certainly A) means there's no need to decline much to kill puts and, I suppose, B) there's no need to stop falling if it kills more calls. (But as we well know, of course, put buying will leap up when/if we get any downside pressure.) HUH? We do not need a decline to kill puts. In fact the lack of puts means a decline is free. If the powers that be (those that sold the calls), short here at this top, not only do all the calls go up in smoke they make money on the short side as well. Unfortunately, the QQQ fly in the ointment is a huge block of QQQ 24 puts. I would be damn positive of a nice fat decline if it was not for that block of puts. But If we can get to QQQ 27, a pullback to QQQ 24 would be quite decent for puts. What also strikes me about this situation is that right now, the "big boys" aren't losing in the option market either: we've been rallying slowly enough that very few stocks are running away and the declining VIX has impacted premiums, too I am convinced that the big boys NEVER lose (well hardly ever). The best case scenario is a close right at max pain. The boys eat the whole options pie and only scraps are left for those that go in at great prices (towards expiry itself, or played for the max pain rally/decline as appropriate but at least 1 month further out). If we decline "da boys" collect 100% on call positions and hedge the puts by going short. If we rally "da boys" collect 100% on PUTs and go long to cover the calls. They never lose. In the latter two scenarios da boys only collect 1/2 the options pie but they break even by hedging the other side (perhaps they do better than that cause they still collected the call premiums). Now, if we are below max pain and a rally starts they will pile in and unhedge those shorts, providing fat to the fire but in some months (like last one) they could not contain the exhuberance once it started and had to delta hedge long. Still, most of the option premiums on the calls were sucked out by the time the rally started and the hedged long positions made $ as well. Thus you can see my belief that "da boys" never lose on the big plays. QQQ MSFT INTC CSCO. On small crap, perhaps. Sometimes they eat the entire pie, some months they only get half of it (but the other 1/2 they do not lose on). Being the pigs that they are, they do not like to share the pie very often. M