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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Jerome who wrote (31387)	7/11/2006 4:15:25 PM
From: etchmeister	Respond to of 95596

But at the same time when when all the passengers lean on one side of the boat....most end up drowning. That's a great way to put - I think that's what exactly happened over the last six months. The situation was very similar in 2004 - the drop in 2004 was sharper compared to 2006. I recall short interest was relatively high in Nov. 2003 and there was a short fry (back in 2004 AMAT declined from a higher level compared to 2006)). Once the short fry was completed the financial community started to downgrade in Jan 2004 (GS "cycle peaked"). This is up/down grade history for Advanced Energy which is key supplier for AMAT et al and some shorts on AEIS yahoo board got really nasty about GS upgrade - once the shorts got fried GS turned coat quickly. 3-Feb-04 Goldman Sachs Downgrade Outperform In-Line 4-Nov-03 Goldman Sachs Upgrade In-Line Outperform What's kind of interesting 6 months ago the magnitude of the upturn was unknown. Usually if one bets against common opinion (in this case assuming a strong upturn back in Jan 2006) one should get rewarded. Based on what we know today the call buyers who got sacked were correct from fundamental point of view - but than again when all lean on one side the ship might sink or at least take some water. One thing would be interesting to know is when the put and calls were purchased - basically track put/call volume for 16, 17, 18 versus time - What's also remarkable (we already talked about this) is the high confidence level of call sellers; call sellers might even to some selling to get the boat rocking... of course these are just my thoughts

To: Jerome who wrote (31387)	7/18/2006 10:46:01 AM
From: Ira Player	Read Replies (1) \| Respond to of 95596

Jerome, It is oversimplifying the option open interest to assume it represents it's face value. You do not have information on any hedging that is happening behind the scenes. A person taking a position in an option contract is making an unhedged 'bet' on the market. Often, the other side is taking the order, but hedges the position to 'eliminate' (read that reduce) market risk. For example, when a Market Maker gets an order to "Sell XXX Puts", he is probably not already short XXX puts, but he wants to buy them at the bid in order to capture the bid/ask spread since that is his primary business. When he buys the puts to complete the order, he will simultaneously buy the number of shares to make him "Delta Neutral". If the market drops, the puts gain in value and the shares lose a similar amount. He fully hedges his position so short term market changes do not effect him. In this example, the number of put option open interest rises by XXX, but the unhedged position that created the open interest is bullish, not bearish. We don't have enough information to interpret open interest as an indicator. Ira