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.

Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Sowbug who wrote (38074)	3/6/1998 1:19:00 PM
From: George Coyne	Read Replies (1) \| Respond to of 61433

<< Glenn, I can't remember whether you're the one who was talking about how the open interest for options tends to predict what the closing price will be on the day of options expiration. Maybe it was Gary.>> Sowbug, This question seems to come up a lot. The posts which provided insight to me were by Carl Rohman about 6 months ago on this thread. techstocks.com That explanation is refined by this one. techstocks.com Hope they help. G. W.

To: Sowbug who wrote (38074)	3/7/1998 11:00:00 AM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 61433

Anyway, can somebody explain why that works? I know that if I write a call, I am bearish on the stock and I will probably not buy it, so you can extrapolate from that that for every written call there is another bear out there. Yet at the same time, there must have been somebody who bought that call, meaning that there is another bull out there. So it seems that the two cancel each other out. Sowbug, Most people buy calls with the idea the stock will go up. It is a gamble since the call has a limited life. The assumption made about a buyer for each sellers is not correct. The Market Makers will sell as many calls as you or the entire market wishes to buy. The Market Maker is then short the stock but will take that chance since 80% of all calls expire worthless. There is a natural phenomenon that will cause the stock to go to the strike price with the highest OI that was expained well on SI. I will see if I can locate that post and post a link. Glenn