'calaban48' pid='29934' datel Wrote:
Here's what I see: On Monday morning I checked the Options chain and noted 5,000+ puts at the $65 strike price, with about 3,000+ puts at $60.
I surmised from this that -- without real news -- IOC shares would be driven down from Friday's $67.17 close to an OED close at $65.
I advised a friend and traded accordingly myself. (I hold IOC in several accounts: some are untouchable holders, some are traders.)
Tuesday and yesterday there were more than 4,000 puts at $60, and just a few more than the previous day at $65.
What I see is a taut challenge between the $60-bettors and those at $65. Each group will manipulate the PPS their way and whomever wants those shares put to them most -- wins.
Today's stock price is just an arbitrary number selected by Options traders. It's relation to IOC's true and much higher value is really negligent.
I watch the Options chain closely for clues to future market behaviour. Any advice on reading it better are most welcome.
Calaban,
You may be correct in your bet but I think you should use different data. The large volume puts on both days were part of spread transactions in which, I believe, the October puts were rolled onto November thus leaving those puts out of any October calculation. This game has gone on for some time; I suggest that whenever you see a large volume trade in options you should scan all the chains for a corresponding second transaction. This does not weaken the thrust of your thinking because, as I understand it, large volume put trades taken on by the market maker causes him to short the stock, which is the real reason for the price decline. The market makers are allowed naked shorting in their own accounts.
My own indicator is the open interest in calls. I believe that the market maker has been selling calls on shares he doesn´t have. So, it likely is in his interest to make as many calls expire worthless as he can, or drive the pps close to the larger open interest strike so he can get the call holders to close their positions. For Friday, this looks to be the 60 strike with 241 open interest as I write. Depending on where the market maker´s book stands, he may settle for 62.50 (note the large put open interest at that strike.)
Neither of our methods can be consistently accurate because we don´t know the market maker´s positions going into close. But I think there are hints.....fwiw and good luck.
katytrader
