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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Eddie Kim who wrote (8854)	10/20/1998 7:47:00 PM
From: Herm	Respond to of 14162

Hi Eddie, I will attempt to answer your questions. What percent of options expire worthless each month? Most estimates I've read indicate that 70%-75% of traded options expire worthless each month. Do MMs or large investors nudge stocks for their advantage on expiration day? If they do HOW and how profitable is it? Hummm? I spoke to a floor trader once at the CBOE's free seminars given around the country. I highly recommend them! They will dazzle you no matter how experience you are! They have experts that can round circles around Wade Cook! Let's define what an MM is first. Market-makers provide liquidity in option trading by risking their own capital for personal trading, and are the backbone of the CBOE's trading system. I was really surprised to find that they (the MMs) take the opposite side of public orders by competing in an open outcry auction market. Floor brokers, on the other hand, act only as agents, executing orders for public or firm accounts. So, if the MM sells a PUT he/she must also sell a CALL on the same issue to balance out the position. It is the spread between the two instruments where the MM makes the money. Of course, if a stock goes up it can't be down so one or the other option will be in the money or out of the money! The MMs told me that they scalp 1/8s and 1/4s points by the thousands per day. Big money buys and sells blocks of stock which impacts the stock price and the confidence of the investors. They can start a stampede in two directions. They can first move on the options and then drop the bomb in the stock price depending on what is easier to impact. If they exercise the options that gives them more shares to fuel the fire. Many times they can make the moves and get out without having to front the money! It's like they work on the float. Plus, if they own a seat on the exchange they basically pay nothing for the transactions. Those 1/16s, 1/8s, and 1/4s add up real fast.

To: Eddie Kim who wrote (8854)	10/20/1998 7:47:00 PM
From: Herm	Read Replies (3) \| Respond to of 14162

Hi Eddie, I will attempt to answer your questions. What percent of options expire worthless each month? Most estimates I've read indicate that 70%-75% of traded options expire worthless each month. Do MMs or large investors nudge stocks for their advantage on expiration day? If they do HOW and how profitable is it? Hummm? I spoke to a floor trader once at the CBOE's free seminars given around the country. I highly recommend them! They will dazzle you no matter how experience you are! They have experts that can round circles around Wade Cook! Let's define what an MM is first. Market-makers provide liquidity in option trading by risking their own capital for personal trading, and are the backbone of the CBOE's trading system. I was really surprised to find that they (the MMs) take the opposite side of public orders by competing in an open outcry auction market. Floor brokers, on the other hand, act only as agents, executing orders for public or firm accounts. So, if the MM sells a PUT he/she must also sell a CALL on the same issue to balance out the position. It is the spread between the two instruments where the MM makes the money. Of course, if a stock goes up it can't be down so one or the other option will be in the money or out of the money! The MMs told me that they scalp 1/8s and 1/4s points by the thousands per day. Big money buys and sells blocks of stock which impacts the stock price and the confidence of the investors. They can start a stampede or pug up a hole in the dam. They can first move on the options and then drop the bomb in the stock price depending on what is easier to impact.