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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Herschel Rubin who wrote (58254)	12/8/1998 11:42:00 PM
From: Peter Dierks	Read Replies (1) \| Respond to of 58727

Options Specialists are just businessmen trying to make a buck without incurring risk. When they sell you an call contract they buy one hundred share of the underlying security to protect themselves from the risk of appreciation (unless they can match you with another seller). When you unwind your position they are asked to buy your call, and have no need for the stock. Holding stock is risky, thus they sell the 100 shares. You understand the first part, but what about options expiration? If there is a large call option position at expiration in the money or just in the money, then there are many sales of the options to collect whatever money is left. The market makers then sell their securities pushing the price down, thus reducing the value of the remaining calls, and perhaps making some worthless. This appears to the casual investor to be a conspiracy by the market makers. The sudden downturn in stock price may either cause momentum players to jump in a short it, or bring new value buyers on Monday following expiration. Peter