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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: N who wrote (394)	8/11/1998 7:53:00 AM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 3536

Nancy, Many of the large speculators reportedly have large dollar calls vs the yen. Not all of them may be at 147 but there could be a large position at that strike. What Mr Parsons is probably referring to is the hedging tactics of the option writers. In all likelihood they have been long at least some dollars vs these calls. If they can keep the dollar below the strike till expiration they can take the profit on these hedges as well as the initial premium. However, if the market can push the dollar significantly through these levels it will cause these option writers to not only buy back any hedges they may have taken profit on but also buy in the balance of the dollars they need for the options. The speculators long the options are not necessarily passive in this either. As we get close to the strike they may buy dollars in the open market in an effort to force it through the strike and trigger the covering. This is why large strikes tend to generate significant activity as you get two large camps both trying to influence the market. Henry