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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: Michael who wrote (14024)	11/7/2002 5:30:19 AM
From: LTK007	Read Replies (1) \| Respond to of 30712

<Assuming it is, then why would the writer buy them back if they anticipated a market decline. It would seem to me that they would only repurchase them to protect themselves against the liklihood of them becoming even further in the money by Opex.> when you put your options up for sale that you bought. They will be bought, the price they are bought at indicates the demand. But i have never known not being able to sell at the bid. I have traded options when i was the open interest:) I have loved to get under a very thinly traded stock that looks to be tanking. I don't ask, i just take the bid. The value seems to be all computerized and the options market i have never known to not provide liquidity. <<Calls can only dissappear if the people who originally wrote them buy them back. >> it is my understanding(though perhaps i be wrong) they must buy them back. But if you are at the ask, you can sit until hell freezes over. Just go at the bid. Max P.S.The general rule i have heard is if open interest on calls drops significantly it means there are those thinking the upside is over,and they are closing out. Please correct me if i am wrong. But as i say i never haven't been able to unload options, though at times i must go at bid.

To: Michael who wrote (14024)	11/7/2002 8:43:20 AM
From: mishedlo	Respond to of 30712

My reasoning is this. Calls can only dissappear if the people who originally wrote them buy them back. i.e if you had originally sold them to me, who then sold them to somebody else, they would still remain in the open interest. However if you bought them back from me then they would "disappear". Is that correct ? Assuming it is, then why would the writer buy them back if they anticipated a market decline. It would seem to me that they would only repurchase them to protect themselves against the liklihood of them becoming even further in the money by Opex. If that was correct then the implication would be bullish, no ? I have only a basic understanding of options so I amd sure I am missing something basic. i would appreciate it if you could explain. The option disappears when the writer buys it back yes. But he buys it back not necessarily because he wants to but to provide liquidity in the market. With the selling of ITM calls, the writer unwinds delta hedge long he has in place. In other words, sell the common he has as a hedge. This puts dowward pressure on the stock prices as the hedges are unwound. If somehow they were all liquidated in mass (without prices moving then yes there would only be puts left and that would be bullish). But that was not accomplished on the higher strikes just the 24's. M