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Biotech / Medical : Vivus: into single digits -- Ignore unavailable to you. Want to Upgrade?

To: AlienTech who wrote (722)	7/18/1998 1:21:00 PM
From: Bill Fischofer	Read Replies (1) \| Respond to of 1016

No, what you saw was arbitrage at work This is how options work. Arbitrageurs were simply locking in their profits. This is the natural order of the markets. The key is to recognize this natural order for what it is and to make use of it appropriately. For example, say you want to buy VVUS yesterday and it's currently trading at 7 5/8. Because you know that the 7 1/2 strike will likely be pinned, you can take advantage of this knowledge and know immediately that you should not have to pay 7 5/8 for your shares. In fact, if you are nimble you could even consider shorting at 7 5/8 with a plan to cover and go long at 7 1/2 as the price is pinned. Whenever one is trading near expiration dates it's always worthwhile to check the various strikes and open interest on the associated options at cboe.com to see if you can take advantage of this phenomenon. It doesn't always work, but it's another piece of the puzzle and another tool in the trader's toolkit.