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To: mansan who wrote (5586)	11/14/2002 3:41:55 PM
From: mansan	Respond to of 10157

from www.bigtrend.com In Monday's TrendWatch we took a look at the open interest on QQQ options to help us determine where the QQQ's may close this week. With most of the calls having strike prices at 25, and most of the puts having strike prices slightly below that, we were able to infer that the QQQ's would stay somewhere in the 25 range through Friday. After all, why would anyone be willing to pay more than 25 for the QQQ when it could be called away? Of course, after Friday's option expiration, the QQQ's will not be shackled by the possibility of puts and calls being exercised against them. A few years ago this type of strategy wasn't common, nor was the open interest information. But as time goes on and investors become savvier, we begin to see new trends and smarter trading. In this particular instance, we have seen that the stock traders and option traders are locked in a stale-mate battle, with neither side seeming to budge, especially on expiration days. The result? Expiration days have traditionally been volatile days, with wild price swings and anybody's guess about how the day would end. But recently we've seen a new trend develop on expiration days. We are now seeing a bias for little or no volatility. This new trend is mostly evident on the actual expiration day, but you can see volatility start dwindling the week of option expiration. Why? The open interest information is transparent; anybody who wants it can get it from cboe.com. It's also available well in advance of expiration days. As more and more traders realize that the open interest is a clue to where stocks or indices will end up on expirations, it will be less likely you will see willingness to buy or sell at prices that aren't consistent with the option open interest. I created a table of the daily changes in the Dow for recent expiration Fridays. With a couple of exceptions, the days are relatively mild since the open interest inferences are built into the closing levels days in advance of the actual close. bigtrends.com While there will certainly be exceptions to this new trend of low-volatility expiration days, it is important to realize what is already built into price levels, and when it is built in. Perhaps we can get a feel for tomorrow's close based on today's closing level. SUPPORT RESISTANCE Nasdaq Composite 1350 1375 S&P 500 870 895 Dow Industrials 8300 8500