near term ITM option surge

wmi2009

Any Laoda knows what that means? OTM option surge usually means speculation. The stock will likely go the direction which favor the surged option. ITM surge means protection or speculation?

biorjin

arbitrage, I guess

wmi2009

Thanks. So, it's meanless for direction? I noticed one case, ITM put and OTM call surged with similar volume. It turns out stock price surging. However, I don't have enough data to draw any conculsion yet.

lwjnbtx

Could this be straddle or strangle play? Since u mentioned the stock price surge.

bayliner1979

"I noticed one case, ITM put and OTM call surged with similar volume. It turns out stock price surging. "

In this case, market manipulation is very obvious.
At current market X, MM sells expensive ITM puts and buys inexpensive OTM calls at strike Y, which is > X.
When the market surges to Y, the cost is minimized to maximally inflict ITM puts loss and gain OTM calls profit.

Thanks. So, it's meanless for direction? I noticed one case, ITM put and OTM call surged with similar volume. It turns out stock price surging. However, I don't have enough data to draw any conculsion ...
wmi2009 发表于 2009-4-6 17:38

bayliner1979

ITM calls surge or ITM puts surge?

Based on my previous response,
1) if only ITM calls surge, then bears are coming.
2) if only ITM puts surge, then more bulls are coming.
3) if both ITM calls and puts surge, then pig market at the current market price, the variation is minimal.

Any Laoda knows what that means? OTM option surge usually means speculation. The stock will likely go the direction which favor the surged option. ITM surge means protection or speculation?
wmi2009 发表于 2009-4-6 17:14

buctusa

So MM will push the market up recently?

"I noticed one case, ITM put and OTM call surged with similar volume. It turns out stock price surging. "

In this case, market manipulation is very obvious.
At current market X, MM sells expensive ...
bayliner1979 发表于 2009-4-6 20:04

bayliner1979

I think he was talking about a previous case happened sometime ago, not today's case.
The result of today's case depends on whether ITM calls or puts surge, or both surge.

So MM will push the market up recently?



buctusa 发表于 2009-4-6 20:07

buctusa

BayBay Lao Da is always so nice to us! Pls stay here with us......................

  


8# bayliner1979

lwjnbtx

good good study, thanks bay lao da!

wmi2009

Thanks, laoda. I have the same feeling. You are very nice. Today, there are several stocks ITM call surged 15 times. The trading volume is around 100,000 and the average volume for stock is only several millions. I will track them for this OE. hope I can find out some conclusions.

6# bayliner1979

ricky

Do yu mind to share what stocks you are talking about? Thanks

wmi2009

JCP, However, decision is yours. i have no idea which way it will go .

ricky

Here is a link on how to read unusually high option volume.
http://www.schaeffersresearch.co ... 92252&obspage=1

bayliner1979

http://quote.morningstar.com/Opt ... el=A&ticker=JCP

It looks like there is no big change in delta-open-interest today, except on PUTS at strikes 20 and 22.5 with similar value change.
It could be an option spread creation today.
I don't see any other big changes.

JCP, However, decision is yours. i have no idea which way it will go .
wmi2009 发表于 2009-4-6 21:48

wmi2009

The trading volume of April 17.5 is 130,000 which is way higher than usual. Open initial did not change much.

bayliner1979

I don't pay attention to volume at all.
Of course, heavy volume means heavy attention, but this statement is useless because you still have a coinflip chance to bet on up or down.   In the complex probabilistic system of stock market, anything equals to coinflip is just an equivalence of nil.

If today the JCP option player is right, then at April 17 4:00pm, JCP's stock price will be above 20 but much below 22.5 (i.e., between 20 and 22.5, and much nearer to 20), or not very far from 20 if below 20.
Reading this information is not related to the volume reading.

The trading volume of April 17.5 is 130,000 which is way higher than usual. Open initial did not change much.
wmi2009 发表于 2009-4-6 22:14

bayliner1979

If most SPX stocks work like this JCP, then at April 17 4:00pm SPX will be between 800 and 830, and much nearer to 800, or not very far from 800 if below 800.  

wyemlyy

Nice work, Mr. Anderson.

wmi2009

I just noticed the open interest of 17.5 call April is gone. the max pain of JCP shift form 17.5 the day before yesterday to 20.00, seems like it's bad for bear. The retailers may not drop much in the near future.

I don't pay attention to volume at all.
Of course, heavy volume means heavy attention, but this statement is useless because you still have a coinflip chance to bet on up or down.   In the complex pr ...
bayliner1979 发表于 2009-4-6 22:20