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Technology Stocks : Apple Computer (AAPL): Analysis and Forecasting -- Ignore unavailable to you. Want to Upgrade?

To: lucky_limey who wrote (430)	8/21/1998 2:32:00 AM
From: Jon Tara	Read Replies (1) \| Respond to of 692

Geez, why does this stupid explanation about stocks being "pushed down" by the MMs due to options expiration keep coming up? ARGGGGGGGGGGH! This is a natural side-effect of option expiration. I'm too tired to to into it again - see my post yesterday on the main AAPL thread. Understand how options work, and you will understand how stocks sometimes get "pinned" to the nearest strike price at expiration. The profit potential for buyers of expiring options approach infinity as the options get closer to expiration. Think about that a bit. The option values apprach zero. The potential percentage profit on the options on any move in the stock approaches infinity. Any blip has arbs buying cheap options, exercising, and then selling the stock, pushing the stock price down and negating the blip. There is also a "Monday morning" phenomena that can sometimes push the stock down as well. Some holders of expiring at-the-money options may choose to exercise after the close on Friday, or on Saturday morning, if they feel there is some chance of news over the weekend or before the open on Monday. They basically get a "free ride" if the stock should go up on Monday. If not, they will be selling those shares on Monday morning, since they have no intention of holding them. So, one usually expects that any effect of expiring options is completely out of the market by Monday afternoon or Tuseday morning. So, generally,