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Technology Stocks : The New QUALCOMM - Coming Into Buy Range -- Ignore unavailable to you. Want to Upgrade?

To: Art Bechhoefer who wrote (5146)	5/6/2009 6:34:02 PM
From: lml	Respond to of 9132

For every put option that is bought, there has to be a put option sold. Selling put options that are in the money can generate income, if the stock price remains stable or rises. When a put option is purchased, 2 outcomes are possible. Either there is another side of the trade by a put seller, or alternatively, a market-maker (MM) takes the trade by opening up a new "short" put position in his book. The latter creates open interest; the former does not. In contrast to the private put-seller, the MM is not in the business of, nor interested in, holding short position in the put. It doesn't want the risk associated with the short put position, so it will look to enter into a strategy that will remove the risk from its book. That strategy could be to short the underlying stock it may be forced to buy @ expiration, & thereby cover its short position, or it may enter into some type option spread strategy that minimizes market risk on the short put position (selling a call). It is the MM's role to take all trades that creates the imbalance b/w puts sold v. puts bought, & why there's a focus on open interest v. # of contracts bought & sold.