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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Robert Graham who wrote (2313)	1/17/1998 2:13:00 AM
From: Robert Graham	Read Replies (1) \| Respond to of 4969

Oh yes. One more thought on option expiration... There is the effect of the MM exersizing options that were written by covered call writers. The exersize turns into a net sale of stock. The greater the open interest of the CALL option, the more likely there will be enough covered call writers for this effect on the stock. So the net effect on the stock will be to place downward pressure on the price of the stock which will happen on that options expiration Friday, which was mentioned in my previous post. Now, if the option was written by a naked call writer, then the sales of the stock equal the purchases of the stock related to this option exersized by the MM. It is just that the volume in the stock will rise due to this activity over Friday and the following Monday. So there will be that initial short by the MM on Friday. Monday that naked option writer chosen by lottery has to go out on the open market to purchase stock to be delivered to the MM who exersized the option. This will cause upward pressure to be placed on the price of the stock on that day. Bob Graham

To: Robert Graham who wrote (2313)	1/17/1998 5:48:00 PM
From: The Perfect Hedge	Read Replies (1) \| Respond to of 4969

Bob- Thanks and I guess that answers my question though I think I need a another brain to really figure it out<g>. So the specialists who are minding the stock are not the same guys minding the options right?They are doing one or the other,right? Do you think the option mm might ask the stock mm or specialist to hold a stock back if he can?Do you ever think they work together to make the best deal for themselves? What about a specialist holding a stock between strike prices so as not to close on either strike price on exp day? Lastly,you think there's no,none at all, manipulation in regards to stocks to affect options?GD

To: Robert Graham who wrote (2313)	1/18/1998 1:49:00 AM
From: Mark Nelson	Read Replies (1) \| Respond to of 4969

Bob, Thanks for helping to tease out the details of the option market. Re; the effects of options specialists' unwinding the open positions on expiration day (and the following Monday). First, my understanding is that the hedge on a (short) call a specialist has written would be long the stock. With calls, wouldn't the unwinding of the hedge (sale of stock) be the first of two sales, the second of which you referred to as the (short sale) hedge against price drops until the underlying is delivered the following Monday? Mark

To: Robert Graham who wrote (2313)	1/18/1998 1:44:00 PM
From: Dominick	Respond to of 4969

Bob: Great post Bob. I was invited on the Philadelphia Exhange by a specialist 4 months ago. I met other specialists and some who just trade their own acct. Although I don't know what the option dealers costs are, I do know what the stock specialists and traders of their own acct. spend per trade........50 cents! Not bad huh? They do use TA. The spec who invited me uses Elliot's wave theroy others use point & figure charts and various forms of RSI's. Thanks for the option education. Dominick