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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Judy who wrote (11770)	7/10/1998 4:14:00 PM
From: Chris	Read Replies (4) \| Respond to of 42787

HAVE A GOOD WEEKEND ALL. THIS THREAD IS THE BEST AND WILL ONLY GET BETTER. THANKS FOR ALL THE HARD WORK.

To: Judy who wrote (11770)	7/10/1998 5:46:00 PM
From: Robert Graham	Respond to of 42787

Now that you mention it this is exactly what I have seen recently on a stock I was trading CCs on. The stock was hitting a resistance in its uptrend attempting to move up beyond this point and the MM with no apparent cause widened the spread on the option beyond that which would be the normal price for this in-the-money option in relationship to the underlying stock price. Of course during this time the price of the stock did not go anywhere. The stock price never did make it above its resistance except for very short periods of time during the day. Then the stock turned south. Another interesting option MM "trick" is to not take limit orders splitting the spread. There is one in-the-money option that I usually can split the spread on when I go to write the option. I write the option when the stock is topping out and looks like to me it will turn down after a run up. The public probably still thinks the price of the stock is going to continue up. The MM can advertise a wide spread, in this case a 1/4 of a point. The effective spread in this situation is usually in this case a price in the middle of the spread for "bid" and the top of the spread for "ask". But when the stock appears to be toppping and showing tendency to move down under selling, the MM will not alter the quote. Instead he will no longer accept sales to him in the middle of the spread. He will want to take in options at the actual "bid". This makes sense of course but what a way to disguise his efforts instead of altering the quote accordingly and therefore the price the MM would need to honor. Interessting, eh? How about this one with respect to the NASDAQ MM. Over the past couple days I have seen a selloff take the price of a stock down to below a significant support where more selling was encountered. The MM when he could then pegged the price right up against the support (now resistance). Occasionally the price would travel a bit lower but then would end up back at the new resistance not going anywhere for long periods of time with a spread between 1/16 and even 1/32 of a point which is unusual. Each time the MM attempted to move the price above new resistance, more selling would enter. There was also a support 1/4 of a point lower for this stock. You have seen this type of setup on charts as a very narrow "corridor" the stock can trade in at a given price level. Now when selling (and buying) activity subsides at current price level, then the MM moves the price down to support 1/4 lower and immediately encounters buying which he uses to pop the stock above the resistance level. I think two things are established in the MM favor using this technique. One is that a "value" price at the resistance has been established. So the day traders will tend to purchase on dips. Second, once the trading activity subsides, a move down to an underlying support generates buying pressure that the MM can aggressively move the stock up on. What do you think? Bob Graham