Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Ploni who wrote (2231)	2/4/1998 11:38:00 AM
From: Humblefrank	Respond to of 18691

Look at open interest on puts and calls for spx (S&P 500). At 980 and up there are far more calls. From 950 down there are far more puts. It's hard to say now, but it looks like the point where puts and calls will be even is going to be 960 or 970. If this turns out to be the case I would expect the S&P 500 to be at around 960 or 970 by the third friday of the month. What happens is people have been buying calls as well as futures for the last two weeks. The futures are actually larger and more important but I don't know how to judge the interest. Each call represents 100 shares of stock so this pushes the market up. The way market makers hedge S&P futures or call options is by buying the whole S&P, thus we have an S&P rally. Within the next weeks or two the market will reach a top and start to falter. At this point the people who bought these calls will start to sell. The market will head back down as these hedges are unwound. After that the people may start buying puts and shorting futures which would push the market down. The cycle could continue next month, but at some point it will break down. Chances are it will break the opposite way from what we expect. In other words if people stop buying puts it will break down. After the market dropped in Oct. it bounced back a full 10% by option expiration so as long as people keep buying puts I think the market will bounce back. I've seen this happen on stocks like Intel which had high option interest and eventually the stock breaks down.