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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Burt Masnick who wrote (66652)	10/14/1998 5:05:00 PM
From: Tony Viola	Read Replies (1) \| Respond to of 186894

Burt, yes. I think you described the max pain thing exactly. My question is, what is the max pain price for Intel stock WRT options expirations for this month (third Friday = this Friday = expiry day). That is, what's the price at which the big boys clean up the most. Ben Antainitis, I think it is, and I may have botched his name, drops in to a lot of the SI threads with that info about now. Yo, Ben. Tony

To: Burt Masnick who wrote (66652)	10/14/1998 5:28:00 PM
From: Tony Viola	Read Replies (1) \| Respond to of 186894

Burt, by chance, I stumbled onto a max pain analysis over on AMAT, and got to one for Intel. Sure enough, the max pain point beckons to Intel to go lower (to about $80). Explain today's actions some? pipeline.com Tony

To: Burt Masnick who wrote (66652)	10/14/1998 7:23:00 PM
From: nihil	Respond to of 186894

RE: Market makers and options prices Market makers as rational business people like sure profits and hate to be in a net long or short position at expiration. To avoid this, they balance their books in each particular stock and puts and calls, especially in the expiring. Suppose he is short 10 Intel 85 Oct puts and short 20 Intel Oct 80 calls. If Intel expires at 83, he will pay 200 on the puts and 600 on the calls. If he could change the stock price to 80 he would pay 500 on the puts and nothing on the calls. But he can't do it directly (and if he could, he would be guilty of market manipulation and monopoly). What he can do is to look at his book. He will find that he is long 2000 INTC (which he bought as a hedge when he sold the calls) and short 1000 INTC (which he sold when he sold the puts). He is in the business to capture time and volatility premium and not to be hung out to dry by swings in the underlying. As a market maker in the options he is required to post bid and ask and trade with anyone who shakes hands. As a MM who buys and sells options he is a major trader in the underlying simply to keep himself hedged. A MM has limited capital, and will trade stock and convert puts to calls and calls to puts and sell off particular options to reduce its risk. During the last days before expiry, there is little time premium to lose, so it makes no sense to hold really risky positions. Out of the money put and call prices collapse to ~zero but MM are careful not to be short. Speculators buy these cheap positions (sometimes volumes increase very rapidly). Today, someone (largely MM) bought 4254 contracts of INQVP (Oct 80 puts) at about 3/8 for about $200,000. Odds are the MM will just put this premium in his pocket. Most flesh and blood INQVP owners sold out on Tuesday a week ago or thereabouts at 4 or 4 1/4 when INTC hit 77. Similarly some one (MM's?) bought 11,060 contracts of INQJQ (Oct 85 Calls) for about 3/16 (a total of ~$3 million). As a customer paying commissions I am not interested in either buying or selling at these prices (wish I had sold yesterday) unless I've got bunch to get rid of (Open Int = 43,250 contracts). Someone's got a lot of selling to do Thursday and Friday. If I were a MM I would lower my bid-ask on both the put and call and as quickly as I covered my short options I would close out my stock positions. Since open interest in calls is about 60% > oi in puts, I expect downward price pressure from option MM's liquidating their net long october positions, but still, a maximum of 5.4 million shares (Oct Calls - Oct Puts) should be sold by MM in the next two days. But volume for later calls was huge. INQAN (Jan 70) alone sold 11,420 contracts today). Total stock volume today was 27.7 million. Ho-hum.