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.

Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (30423)	5/20/1999 1:54:00 PM
From: Robert O	Read Replies (1) \| Respond to of 70976

Yea, G, I eyed out Ben's site a week ago and max-pain point[tm] was also around $55. I figured the earnings, if well above Street est., would be one of those factors that 'swamped' the effect. I suspect though that every dollar drop in price coming back towards $55 represents millions 'saved' by the writers. Every little bit helps ;-) From Ben's site: There is a Wall Street axiom that says "90% of all the options that are bought and held to expiration will expire worthless". This means that 90% of the time the people who 'write' the option and collect the premium, never get their stock 'called' from them or get stock 'put' to them. While this is true, traders I know indicate that the 10% that don't expire worthless can REALLY eat into the profits of the writers. Imagine you are an option writer collecting 1 and 2 dollar premiums, per contract, very near expiration every single month in Chrysler. Each month stock price never can quite get to or exceed strike and premiums are kept by writer. Making money slow but sure. Then one month it's announced that Mercedes and Chrysler will become one and the stock price surges up unexpectedly making the calls very valuable for the holders and suddenly very expensive for the uncovered writers especially. Looking at the year 90% of the time the options expired worthless perhaps garnering the writer, say 11 months x $2 or $22. but the one knock out month losses him $22 or MUCH more before he can scramble out. It takes a lot of capital to play this game and take the few big hits in order to continue. This qtr. to my mind was AMAT's Benz qtr. catching the writers off guard, but they'll have none of it. Damnation, remind to be rich and powerful someday. RO