how "open interest" is raising in some "call option" when market in deep falling?

Question

in deep falling market seller can sell confidentely and buy at lower rate, but how a buyer is buying in deep falling market, and when he sell, market may not come up faster

Answer 1

Open interest simply refers to the number of contracts open. 300 open interest means the market as a whole has 300 contracts open that are long, and 300 contracts are short. You seem to imply that if markets are going down, you can safely assume they'll continue to drop. I don't know of any sure things in the markets...bear market rallies are vicious. Just because it has been falling hard doesn't mean it will continue to.

Market makers can hedge their positions by selling short stock to offset a long call options position, and buying stock to offset a short call options position. There is a theoretical construct known as delta, which estimates how much an options price would move for every $1 of movement in the underlying. For instance, lets say the delta for an XYZ 35 option was 0.2. The delta would estimate that the option price would move $0.20 for every $1 the underlying (XYZ stock) moved. If you had bought 100 XYZ 35 contracts, you could in theory, offset the price movement of the options by selling short 2,000 shares of XYZ. If the price then went up $1, you'd lose $2,000 on your short position ($1 * 2,000 shares), and make $2,000 (100 contracts * 100 shares/contract *$0.20/share) on the options position. The reason you'd do this is to try and profit the spread on the options transaction. Usually, you'd buy below fair value, or sell above fair value. The profit would come from this spread. This would require adjusting the short position as the delta changed. If delta went up to .25, you'd then need 2,500 shares short to offset the risk in the long options position. So if people want to buy options, market makers will usually sell them if the price is right. Ditto people wanting to sell options.

Answer 2

Market makers ("liquidity providers") must always have bid and ask quotes outstanding and must buy at their bid or sell at their ask, so there are always buyers around for options.

Market makers, and many other professional option traders, do not try to make money by prediciting the direction the underlying will move, but by prediciting how volatile the price will be.

Anyone who undestands synthetic option positions, including market makers, can effectively convert a call option into a put option. For example, if I bought 4 Jan $50 strike call options on XYZ I could sell 400 shares of XYZ short and the combination of the long call options and the short stock would be equivalent to being long 4 jan $50 strike put options on XYZ.

Answer 3

These two events may be independent of each other. "Open interest" is a reflection of market participants to trade one strike price of an option. We don't know where the market is heading -- it's been show time and time again that the market exhibits random walks, which is why economic agents buy and sell securities (sometimes options) to gain wealth if their trades are successful.

Another possibility that explains your observation is people are buying put options as an insurance policy given the decline in the market.

Answer 4

If you actually look up the cross reference to the scripture at John 18: 6 you will notice it points to John 7:46 where it states "The officers replied: “Never has [another] man spoken like this.” They knew he was the "Christ" which is Greek for Messiah. It says nothing about Him being God. Along similar lines, we could read Philippians 2:9, where the apostle Paul describes what God did after Jesus died and was resurrected. The verse says: "God exalted him [Jesus] to a superior position and kindly gave him the name that is above every other name." If Jesus was God or equal to God before he died and God later exalted him to a higher position, would that not put Jesus above God? Yet how could anyone become superior to God? And if he was God before he died, how can God die? There is no "mystery" here. Jesus is the Son of God. Also, God always referred to Jesus as his son, and Jesus always referred to God as his father, showing that God was older and had more authority. He also said that he came to do God's will and not his own, showing two wills; his father and his. Two separate wills. If you want to go on believing that God has three heads, then you must have three too, since you were created in his image!