Literally I know what it means, but what does it do to the market? It sounds like people use it as an excuse for something.
2007-02-16 07:56:16 · 6 answers · asked by Paper M 1 in Business & Finance ➔ Investing
It means they want your money NOW.
2007-02-16 08:03:20 · answer #1 · answered by Dovahkiin 7 · 0⤊ 3⤋
Stock Options are contracts that allow a person to buy or sell a stock at a set price (called strike price). Options have an expiration date after which the contract is not valid.
Option expire either "in the money" which means the option is worth something, or "out of the money" which means the option is worthless.
American options usually expire on the third Friday of the month.
2007-02-16 16:15:28 · answer #2 · answered by Aron K 2 · 1⤊ 0⤋
As the end of trading on the third Friday of the month approaches, there can be some unusual volatility in stocks that have options.
Some people take that as an indication of market manipulation but, in my opinion, it is primarily an indication of option market makers hedging their options positions.
Option market makers hedge their options positions with either long or short stock positions. However, after expiration those options will no longer exist and the stock position will no longer be needed to hedge the options. Consequently, the market maker is likely to be making large stock transactions to eliminate his stock position hedge, causing unusual volatility in the stock's price.
2007-02-16 16:37:25 · answer #3 · answered by zman492 7 · 2⤊ 1⤋
As investors in the options close out their positions it affects the prices and demands of the underlying securities, especially if said security is near a strike price.
Big money institutional investors, who can profit on a few cents price differential, will be closing or covering positions to maximize their profits. You end up with a lot of money going in and out of these securities, causing rapid price changes.
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2007-02-16 16:49:45 · answer #4 · answered by Tim P 2 · 0⤊ 1⤋
It means the avalibility of a stock is decreasing. That can signify that a "run" is occuring due to speculation and the price per share is expected to rise. It also, however, is a tactic used by unscruplious traders to attempt to make a sale quickly.
Check out all stock price trends yourself before investing. Don't take someones word for it.
2007-02-16 16:07:05 · answer #5 · answered by Anonymous · 0⤊ 3⤋
one thing it does is you'll see the stock price being forced to close wherever the strike price is that has the most put/calls ........like AAPL today at 85
2007-02-17 06:36:10 · answer #6 · answered by Sizzle Pizzle 3 · 0⤊ 1⤋