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

To: Joseph A. Aboaf who wrote (47439)	5/22/1998 7:00:00 PM
From: stilts	Respond to of 61433

It's my understanding that open interest is simply the aggregate number of outstanding option contracts (for each strike price and expiration date on the exchanges where the contract trades). When you buy or sell an option contract, your broker will ask if you are opening a new contract(s) or closing it out. If you're opening, then your contract(s) will add to the open interest amount of contracts; and vice versa if you're closing out your position. Open interest influences the price of the underlying shares because people (often market makers) who write calls often hedge their position by buying the underlying stock, and then sellingl shares as the expiration draws near to the extent the options they were hedging are at or out of the money. Vice versa if they write puts: they'll short the underlying shares to hedge the option position, and cover their shorts as the puts expire at or out of the money. stilts