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Technology Stocks : Altaba Inc. (formerly Yahoo) -- Ignore unavailable to you. Want to Upgrade?

To: Rational who wrote (5423)	12/31/1997 6:02:00 PM
From: fut_trade	Read Replies (2) \| Respond to of 27307

<<Yahoo! seems to have a lot of muscle!>> No No No Sankar. It's all in the Hilium pump.

To: Rational who wrote (5423)	1/1/1998 5:59:00 AM
From: Mama Bear	Read Replies (1) \| Respond to of 27307

>>>April 40 Call buyers must be expecting Yahoo!'s price to exceed 40 + 30 3/4 (prm) = 70 3/4 by April 1998<<< Unless of course it was the specialist doing the buying. There are only two rational reasons I can think of to open a position in April 40 calls, both involve the ecpectation that the price will decline. The first is the share owner who wishes to hold his shares but does not wish to lose any nominal value. He sells covered April 40 calls. The other is the speculator who is writing them "naked", because he believes the price will fall. April 40 calls will fall just about dollar for dollar with the stock and therefore make a good shorting vehicle. >>>Yahoo! can still rise till April (at least the call buyers must be believing so and brokers who write calls may not care as long as there are enough buyers).<<< You do of course realize there is an option specialist who's responsibility is maintaining an orderly and liquid market in these options contracts? If I want to sell these calls he has no choice but to buy them, as long as I am willing to accept his offer. The offer of course is the bid. Why do you think there are brokers writing the calls, or are you just mixing broker up with specialist? there does not need to be a natural buyer in the picture by any means. If there is no natural buyer the specialist simply sells the common stock short, thereby locking in his profit (the spread) either way. If the stock goes up, he loses on the short of the common, but he gains on the calls he was "forced" to by. Either way he locks in the time premium (admittedly small on deep in the money) and the spread. It is the unravelling of these hedges and options arbitrage that many mistake for manipulation when expiry rolls around. Barb!

To: Rational who wrote (5423)	1/1/1998 3:20:00 PM
From: Oeconomicus	Read Replies (1) \| Respond to of 27307

some calls even went up in price while some puts went down Sankar, did you bother to check when the April 40 calls traded at $29. I think it was Monday. Where was the stock then, $68 or so? And what time yesterday was the $30 3/4 trade? Could it possibly be that the stock was at $70 or more then? And when did the Jan 60s last trade prior to hitting $11 1/8? Perhaps when the stock was at $65 or $66? Call buyers must be expecting Yahoo!'s price to exceed 40 + 30 3/4 (prm) = 70 3/4 by April 1998 I guess those call buyers are geniuses. Guess what Sankar, it exceeded $70 3/4 already! For about a day and a half as a matter of fact. call buyers must be believing so and brokers who write calls may not care as long as there are enough buyers Did you consider that the buyers could simply be taking advantage of an arbitrage opportunity by buying undervalued calls in combination with other long and short positions in other contracts and the stock? Did you consider that the writers are more likely hedging longs or speculating bears? For "brokers" (really hedge funds, independant traders, and arbitrage/proprietary trading desks at some brokerage firms) to "not care" what happens to the stock that they have written options on, they'd either be in an arbitrage position or they'd be fools (or have traders like Barings used to have) and it's tough to set up a profitable arbitrage by writing undervalued options. What was your paper on again? HNY!! Bob