Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: bluejeans who wrote (38709)	9/19/1998 9:35:00 PM
From: Carl R.	Respond to of 53903

What I meant was that once the stock was above 30, the holders of the September 30 calls were in the money. Also, once the stock was above 30, the delta on those options was approximately 1, so the option writers by then were long 100 shares for each option outstanding. As the day wore on, the holders of the options were running out of time and had to either close their positions or exercise the options. Over 9000 MUIF options traded, indicating that most not surprisingly chose to close their positions. As they sold the calls, the options writers sold the stock, driving it back down to 30, leaving the last ones holding the options holding the bag. So yes, the stock could go above 30 temporarily, but not far, and it couldn't stay there. The large option position actually cause the stock to accelerate as it approached 30 as the delta increased. But once it got close or slightly above, the options pressure was all down. Was the volume heavy above 30. Closing those 9000 calls caused about 900,000 shares to trade on the sell side. Note that without strong buying, the stock could easily have fallen well below 30 under this pressure. Note that had the stock stayed around 29, the options would have been worthless, and the options writers would have dumped the shares that they were holding to cover them. Thus the existence of the large number of MUIF calls did not inherently cause the stock to rise, but did increase the volatility upwards as far as 30, and pretty much put a lid on it at 30. This is one reason that most options expire worthless, by the way. Does this answer your question? If not, please ask again, and I'll try again. Or maybe I can find some old posts I have written on the subject. Carl