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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: posthumousone who wrote (17832)	2/20/2009 5:13:15 PM
From: LTK007	2 Recommendations Respond to of 71475

<<<OpEx stabilized the day>> can u explain that?>> i in no way, i repeat, in No Way am being rude by saying to answer that would be an entry into the maze of all that goes on on OPEX day--it is for the inner circle to know, not we. It would be simpler when once upon a time humans beings actually ruled OpEx day, but now it is via Monster Computers that do can do thousands calculations per moment, and then do appropriate maneuvers. i will say that unless there is some POWER PLAYERS in collussion with each other to drive in the last day HARD DOWN or Explosively up into the close <>u>the object is to get of the market to close as flat as possible. All i can say there is NOTHING simple about opex day, nor even the week. The Put side probably swept out and closed during the down phase and the rest was damage control on the calls that still had value. A lot of what is wrong with our market is the option/futures derivative players are still at it, the casino has NOT been closed. And OpEx day is D-Day, the end of one month of games, the books are being closed. This is NOT for we "mortals" to understand:) Greenspan was the WS biggest boys greatest fan, he loved to announce surprise interest rates cuts on or the afternoon just before OPEX day----that meaning all the most blessed insiders were tipped and loaded up on calls and made millions and millions and millions. Max

To: posthumousone who wrote (17832)	2/20/2009 5:40:46 PM
From: LTK007	Read Replies (1) \| Respond to of 71475

Here is just a minute example of what i mean. This is the days action of SPY calls that had a HUGE volume of 108,000 given it ONLY had 4,062 in the open position going into today. Now imagine Monster Computers wheeling and dealing in nano seconds. SPY Feb 2009 77.0000 call(OPR: SZCBY.X) Last Trade: 0.42 Trade Time: 4:14pm ET Change: 1.33 (76.00%) Prev Close: 1.75 Open: 0.68 Bid: 0.44 Ask: 0.51 Day's Range: 0.18 - 1.41 Contract Range: 1.55 - 14.95(that is for the whole month) Volume: 108,764 Open Interest: 4,062 Strike: 77.00 Expire Date: 20-Feb-09 imagine a machine(following its complex algorithms--that are top secret to certain firms) sweeps and buys 10,000 calls at .18, and makes multi simultaneous maneuvers to create a move up. The machine, if it wants a "blue ribbon" from its makers, gets a value 42 cents, an over 100% gain. The key to this is there was ONLY a 4,062 open interest going today. i can asure the machines were PLAYING D-Day for all it could, and playing both sides--machines can flip in a nanosecond. Why 108,000 today, it was Op-Ex day--the Casino ruled.

To: posthumousone who wrote (17832)	2/21/2009 1:40:05 AM
From: Real Man	Respond to of 71475

It's highly volatile during OpEx. In general, if there are too many puts closing in the money, as was the case Yesterday, folks will take profits. When a speculator sells a put position that is in the money to the market maker, the market maker then buys that put and closes the short position that offsets his short put position. The dynamics that develops is then similar to a short squeeze. Of course, if someone just wants to roll the puts over, more selling comes next week. There is also a different kind of options drag. As time nears expiration, time premium on out of the money options decreases, which, in turn, removes the necessity to hedge for the market makers. For example, if there are a lot of out of the money puts in the market, as time nears expiration, the market maker will cover his short position (offsetting OOM short put position), assuming, of course, that the market does not move, which is not the case. Usually, this kind of drag results in a rally starting on Tuesday of the expiration week or so, if the market is way out of whack with too many puts, but it's not always the case. -g- Yes, the druids run these things, but the druids are programmed according to a variant of Black-Scholes with volatility smirk. The volatility smirk, asymmetric to up/down, is what usually causes POSITIVE "options drag" on the market during expiration week. Needless to say, the MM want "risk free" positions.

To: posthumousone who wrote (17832)	2/21/2009 2:03:53 AM
From: Real Man	1 Recommendation Respond to of 71475

The implied volatility "smirk" was introduced in quantitative finance after 1987 crash. Prior to that it was just flat. Then a different dynamics could develop - as the market moved down sharply through the put strikes, the market makers required to hedge more and more by selling it short, causing a crash in the process. So, these are "quant models" again, just like "quant models" in subprime credit. They failed this October despite the volatility "smirk" in exactly the same way they did in 1987, only much bigger, which is why Citi fired their equity derivatives chief specialist and is about to get nationalized. The losses for the options market makers in October were enormous, and Citi was the key player. So was BAC. Puts are insurance for the equity markets, similar to CDS in the credit markets. -ggg- Which brings me to the point - you can't "regulate" CDS by putting this on the exchange - you will have to ELIMINATE derivatives to diffuse the bomb. The amounts out there cause systemic risk, and it does not matter if they are traded OTC or on the exchanges -g- A simple way to REDUCE that market is to allow failure of responsible parties, no matter how big they are. C, AIG, BAC in particular. You played the moral hazard game, you pay. -g-