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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (174694)	4/14/2005 8:45:43 PM
From: GVTucker	Read Replies (2) \| Respond to of 176388

Amy, it's not a coincidence that a stock trends toward a strike price near expiration. It is due to a concept called dynamic hedging, which is how option traders hedge their positions. An option trader ideally likes to be delta neutral at all times, which means that the trader likes his profit line to be independent of the option's price. This can only be done by (for example) actively buying the stock as it approaches a strike from below and then if the stock gets above the strike, actively selling. Because options traders can tend to dominate trading right before expiration, you have a lot of people buying below the strike and selling above the strike, which naturally moves the stock to the strike price.