Re: AW: What options to sell?

["John Manasco" <john@xxxxxxxxxxx>]

Thanks for the explanation Doc, I appreciate it very much. That statistic
was one that I see bandied about quite a lot and never knew if it was real
or not and it seemed to be contradicted by some of Larry McMillans work. Now
I have a better understanding of it. Thanks again.

John Manasco

----- Original Message -----
From: "The Doctor" <droex@xxxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Tuesday, August 15, 2000 11:51 AM
Subject: Re: AW: What options to sell?


> THE OCR collects the data every month and publishes it annually.  The
stats. are
> virtually identical month in and month out.
>
> 10% of options are exercised and this number would be closer to 55% if
> transaction cost were zero.
>
> 60% are closed prior to expiration
>
> 30% expire.
>
> This data tells you nothing about profitability.  The data only relates to
> customer accounts not market maker .... there is no collection of
open/close
> data from market makers.  The OCC clears every securities option trade in
the
> country so this data reflects both equities and indices.
>
>
> The 90% number you often hear talked about comes from a quote made, as
best as I
> can tell, from an article written in late 1970's which quoted a figure of
90% of
> options go unexercised.  That figures somehow seems to have become
distorted to
> where it is now quoted as 90% expire.  On expiration Friday (or Thursday
for
> some index options) the most likely outcome is that most of the volume
will
> normally be rolled forward.
>
> John Manasco wrote:
>
> > snip snip
> >
> > > I like using credit trades because statistically, most
> > > options expire worthless (excluding the large number which are closed
out
> > before
> > > expiration
> >
> > Where do people get this statistic? Larry McMillan who writes the Option
> > Strategist newsletter did a study of this. He found that over a period
of
> > three months 69% of the open contracts expired in the money which he
defined
> > as having a value of 5/8 or more. Has anyone actually seen any studies
that
> > confirm that "statistically most options expire worthless"? I'd like to
see
> > that study.
> >
> > John
>
>