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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (21861)	7/19/1998 9:41:00 AM
From: James F. Hopkins	Read Replies (1) \| Respond to of 94695

Bill; On Options I think expiration is the best time to look over the option action. I did this several times but was looking at other things such as the win/lose ratio. It's from that I concluded that more money was lost on options than won. ( by buyers ) and that the writers in general came out better, but the "bookies" were the ones who wound up with most of the money. Via the open interest, vs the trades and then charting them I could eyeball the fact that most options were sold , bought, resold and bought again many times. In many cases this churn if you take into account "the spread" caused the money made on the spread to exceed the original price the writer got. I also determined that as a general rule more money was lost on puts than on calls. Of course we would expect that in a market that's generally bullish. While no doubt some people make money on options there are more losers than winners, the nature of the over head "churn & spread" causes this to be inevitable and it's no were near a 50/50 thing at all. The nut ( overhead ) is more than the nut at a race track, your odds of winning in options are less than in handicapping horses or dogs. A person better be very good at picking them or they will lose money in the long run. So much for the high risk in options. -------------- What I happened by chance to notice this time is the sell at close orders that hit the market yesterday, and telling myself this had to do with arbitrage I asked myself if the options could tell me why. I think in simple terms they did , just looking at the puts and calls closest in the money it's clear that the sell on close orders were connected to those options were the calls were underbid, to the fair value, while they were willing to pay a premium to buy back the puts, ( as they didn't want the stock ) That extra premium on the puts was the tip off, or clincher. --------------- This of course only reflects the short term traders and arbitrage players sentiment. That they can be wrong , or over ridden by longer term players is another story. Meanwhile I'm down loading more option tables before they change them, and focusing on the discount to premium between the calls and puts, some times it is not enough to be meaningful, but when it stands out I'm sure I'm looking at the short term traders sentiment. Jim