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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Robert O who wrote (21747)	7/14/1998 12:17:00 AM
From: Gottfried	Read Replies (1) \| Respond to of 70976

Robert O., short of asking Ben to do the analysis for us there is little hope to see "max pain" for AMAT before expiration. Unless you're a very fast learner. Ben pretty much describes the method. Maybe we should do a poll and present Ben with the results, asking him to do the analysis for us? <G> GM I hope you have read Ben's cautionary statement.

To: Robert O who wrote (21747)	7/14/1998 1:21:00 AM
From: Clarksterh	Read Replies (1) \| Respond to of 70976

The effect that options expirations have on stock price occur because of the following dynamic: 1) In the money calls become hard to sell as expiration approaches, so people start to actually execute them instead of just selling. Most of the people calling the stock do not actually want the stock, so they immediately sell. That drives the price down until the remaining calls are no longer in the money. 2) Same logic for in the money puts with the result that the price goes up, although typically the person who wrote the put doesn't want it either so the effect is more muted (the exerciser buys the stock, puts it to the writer, who then immediately sells it - thereby evening out the buys and sells.) The problem is that generally there aren't too many options relative to the average daily volume, so normally the effect is negligible. It only becomes important when there are a lot of options outstanding and volume happens to be otherwise low for the day, and the call writers aren't in love with the stock or the put writers are. (Nothing like lots of caveats) Of course 50% of the time the stock moves in the 'expected' direction anyway. Clark