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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation? -- Ignore unavailable to you. Want to Upgrade?

To: pcyhuang who wrote (3142)	1/17/2008 8:34:11 AM
From: dvdw©	Respond to of 5034

PcY....you made this post elsewhere and it belongs here; Traded options volume: record high and rising The volume of equity options trades almost doubled last year, and the rise shows no sign of abating. Equity options traded on NYSE Arca Options reached record levels in 2007, trading 336 million contracts, representing a 71 per cent increase on the previous year. With commodities, equities and currencies highly volatile, the incentive to indulge in a bit of options speculation seems great. Options traders trade on volatility rather than price, going long when bullish volatility. This statement can causes some head-scratching, even among seasoned futures traders. Start talking about “the Greeks” and eyes glaze over (stick with me, here). One of the reasons the options market is so confusing is that there are three main reasons why traders trade in it. And all these traders trade with each other. It’s a wonder they ever agree on a price at all. First, in energy for example, there are those dealing in the “underlying”. Gas producers, for example. They might want to lock in the price of the gas they will sell next year, and so buy a put. Second, there are futures traders looking to hedge their risk. Staying with energy, say they are long gas, and worried about their downside exposure. They buy a (cheap, out-of-the-money) put, and, hey presto, limited risk. Third, speculative options traders. An option’s value is calculated by the strike price, the underlying price, the volatility, time to expiry and whether it’s a call or a put, via the Black-Scholes equation. Options traders expose themselves to volatility by buying or selling the opposite amount of their exposure to the underlying price, cancelling out their exposure to price -"delta-hedging”. The other variables affecting the option value can’t be changed. So by knocking price out of the equation, only volatility affects the premium of the option, as long as you’re delta-hedged. Now this is the nub of the issue. Markets are currently volatile, so there have been incentives to go long options for options traders. Indeed, with the cash to be made in speculative options trading, perhaps options desks are being expanded. But since the option volume figures we have are aggregate, it’s hard to know which of the three groups is driving the change. Increased volumes could represent any of three motives. So there are two things we’d like to know: first, which party is driving the increase in traded volumes? And second, since spec options traders would surely be bullish in these volatile markets, and since selling options (unlimited downside risk) is not for the faint-hearted, who precisely is selling them? Full Story: ftalphaville.ft.com My Comment: How much of these surge in selling of options is due to naked shorting of stocks? pcyhuang