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Another view of option expiration, this one in gold. One of the reasons
I listen to Jay Gallemore is his understanding and watching of the many
little nuances in the commodity markets including the effect of options
on the contract prices as options expiration nears. Those who watch gold
futures know that gold had a big run into the 320's accompanied by
predictions of much higher moves, especially from the sellers of gold
options. Gold has since pulled back and the April options expired on
Friday. When Jay commented on Friday's close at exactly 290, I took a
look at the open interest.
GIF is attached showing the April Gold contract in cyan followed by the
April options with the open interest in the right column. All April
options from OGJ290 on up through OGJ400 (290-400 strikes) expired
worthless which means that the sellers of nearly 70,000 calls pocketed
the proceeds. Note how quickly the open interest drops off below 290 -
the 280 and 270 strikes are shown. Coincidence that gold closed at
exactly 290 and not 290.50? Not likely!
Earl
----- Original Message -----
From: "BobR" <bobrabcd@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, March 10, 2000 6:48 PM
Subject: [RT] GEN - expiration
> A trader sees the strangest things on the way to expiration. This
little
> beasty indicator tries to zero in on the OEX as expiration approaches
using
> a combination of historical data and implied volatility and time
decay.
> Either the red line or the green line will zero in on that Friday
close. At
> this point with 5 days to go my inclination is to vote for 780 only
because
> Clyde voted for the redline at 700 with his swing technique.
>
> BR
>
>
Attachment Converted: "f:\eudora\attach\GCOPTION.gif"
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