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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: M. Frank Greiffenstein who wrote (21320)	10/12/1998 6:04:00 PM
From: umbro	Read Replies (2) \| Respond to of 164684

Dcostone asks, Could the contrarian implications of a high put/call ratio reflect large increases in covered put writing? That's the problem with using options volume and open interest in general ... we're seeing all sorts of trasnactions lumped into one statistic. The real answer is that we don't know who established the positions, nor their objectives. Many of the brokerage houses do, however. Schwab is rumored to track the open interest of their customers. They can tell whether the transaction is to open or close a position, whether it is covered, naked, or a spread. Having access to those sorts of statistics might tell a whole lot more about what is going on. I don't believe very much in the put/call ratios, except possibly at extreme levels. The "Max. Pain" calculation is interesting, but the theory that it predicts the stock's closing price at expiration is largely untested. I post those numbers because they are easy to calculate, and _perhaps_ we'll see a tradeable pattern emerge. I mainly follow the implied volatilities. Note: strictly speaking the situation where an investor sells puts with the expectation that they may be assigned to him/her, and that they will lower the cost basis of owning the stock, is a "naked" put sale (or a "fully colaterlized" put, if the money is there to buy the assigned stock). A "covered put" is a put that is sold against a short position in the stock. If I'm short 500 AMZN shares, and sell 5 Nov. 90 puts ... those puts are "covered" by my short shares. Technically, covered puts are riskier than covered calls, because you don't own the shares that you shorted, you borrowed them. The nightmare scenario is that your short shares are called, _and_ the market gaps down at the open -- you are no longer be covered.