Different thinking pays of

nonprophet · Oct 8, 2005

Quote from IV_Trader:

one day before SEBL buyout , 9/9

Was that SGQIB 10 call? After the fact of course seems no coincidence, whether or not this would be reason to act upon then, hard to say..... If at all I personally would have moved to Oct, that's for sure. But in this case eod analysis would have been too late anyway.

Any news about an

investigation in this case ...?

IV_Trader · Oct 8, 2005

Quote from nonprophet:

Was that SGQIB 10 call? After the fact of course seems no coincidence, whether or not this would be reason to act upon then, hard to say..... If at all I personally would have moved to Oct, that's for sure. But in this case eod analysis would have been too late anyway.

Any news about an investigation in this case ...?

yes , SEP 10 calls with spike in IV and three times stock's volume vs. average. I agree , many times unusual option's activity is misleading, but straight buy or sell for OTM sometimes can lead to the winner. Anyway , not my game ; too much work to follow so many for occasional winner.

nonprophet · Oct 8, 2005

Quote from IV_Trader:

yes , SEP 10 calls with spike in IV and three times stock's volume vs. average. I agree , many times unusual option's activity is misleading, but straight buy or sell for OTM sometimes can lead to the winner. Anyway , not my game ; too much work to follow so many for occasional winner.

How did you measure the IV spike? A 5Â¢ option with 1 week to go has little IV value. In general eod I switched from using bid/ask average to ask because too often even the avg is below intrinsic value. What do you use, and do you measure eod or real time ?

markg_ny · Oct 9, 2005

Thanks for keeping the thread alive and giving me and friends a topic for conversation over beer while there is not baseball today:
Just a short summary of comments (what I remember before going to sleep):

Dell-Boy: (re: sorry (markg ny )NO-GO John says you are full of shit).
Funny post. Made us laugh. Calling M/M John when you could just go to any site with volume and open interest data like: (not a spam but site I assume everyone is aware of)
http://www.schaeffersresearch.com/streetools/indicators/equity_oi_config.aspx?ticker_symbol=jpn

On the right site you have a table with open interest with:
Date Call OI Put OI
10/7 1,976 10,497
10/6 1,960 10,810
10/5 1,960 8,318
Looks like open interest for puts increased by 2492 (close to 2500 I mentioned) between 10/5 and 10/6.
One remark I remember: âWe write the software they use on the floor and majority of the guys there do not know a lot. They just do whatever our programs or paper tables tells them. They do not trade the market, market trades them.â

Another comments:
âAny bigger company has historical options data with hundreds having free access to it. There should be at least one person in this forum (who is not a fake) and can get data and share it here for dates and symbols in question.â

BUT BE CAREFUL: If you share the data here and you are not a member for a year or two you could be called âfull of shitâ, spam, etc.

I was promised some database dumps for the symbols and dates in question (just for me to look how the volume was distributed) but I will share it in few days. (hope someone will do this before me).

IV_Trader · Oct 9, 2005

Quote from nonprophet:

How did you measure the IV spike? A 5Â¢ option with 1 week to go has little IV value. In general eod I switched from using bid/ask average to ask because too often even the avg is below intrinsic value. What do you use, and do you measure eod or real time ?

http://www.ivolatility.com/options.j?ticker=SEBL:NASDAQ&R=1&period=3&chart=02&vct=4

Nonpro , do u have B&S in Excel ? If yes , can you PM me ?
I need all greeks , inverse and binary search. Appreciate any help here .

nonprophet · Oct 9, 2005

Quote from IV_Trader:

http://www.ivolatility.com/options.j?ticker=SEBL:NASDAQ&R=1&period=3&chart=02&vct=4

Nonpro , do u have B&S in Excel ? If yes , can you PM me ?
I need all greeks , inverse and binary search. Appreciate any help here .

As you probably know ivolatility's IV index is a weighted average of several strikes and expirations. Doesn't tell you much about activity in one specific series. If I'm not mistaken they only use near-the-money strikes so it seems unlikely in the SEBL case the spike was caused by the 10 call. Could be there was similar activity in other strikes of course, the spike is there iindeed.

Re. excel more code than you wish for here:

http://www.vbnumericalmethods.com/vbnumericalmethods/financial.asp

except perhaps a "inverse and binary search". Wazzdat

??

Profitaker · Oct 9, 2005

What exactly has option volume, P/C ratios or Open interest got to do with future direction ? For every buyer there has to be a seller and vice versa. Open interest is neither long nor short â itâs open.

Knowing who actually initiated a trade may be useful, but even then, you couldnât possibly know whether it was speculation or a genuine hedge.

What am I missing here ?

Multioption · Oct 9, 2005

Quote from Profitaker:

What exactly has option volume, P/C ratios or Open interest got to do with future direction ? For every buyer there has to be a seller and vice versa. Open interest is neither long nor short â itâs open.

Knowing who actually initiated a trade may be useful, but even then, you couldnât possibly know whether it was speculation or a genuine hedge.

What am I missing here ?

Ditto!

Many options traders seem to believe that they can gain insight into market's direction by looking at options' trading activities. So, when they spot unusual increase/decrease in volume and open interest, they assume that the underlying security is about to bust up/down. However, all options traders who care less about direction and timing have been busted!!!

Options is a derivative. Its value is derived from movement by the underlying security, so ignoring the importance of market's direction and timing will make you a miserable trader!

IV_Trader · Oct 9, 2005

Quote from nonprophet:

As you probably know ivolatility's IV index is a weighted average of several strikes and expirations. Doesn't tell you much about activity in one specific series. If I'm not mistaken they only use near-the-money strikes so it seems unlikely in the SEBL case the spike was caused by the 10 call. Could be there was similar activity in other strikes of course, the spike is there iindeed.

Re. excel more code than you wish for here:

http://www.vbnumericalmethods.com/vbnumericalmethods/financial.asp

except perhaps a "inverse and binary search". Wazzdat ??

thanks for the link

nonprophet · Oct 10, 2005

Quote from Profitaker:

What exactly has option volume, P/C ratios or Open interest got to do with future direction ? For every buyer there has to be a seller and vice versa. Open interest is neither long nor short â itâs open.

Knowing who actually initiated a trade may be useful, but even then, you couldnât possibly know whether it was speculation or a genuine hedge.

What am I missing here ?

To check out the option market can at least be an additional factor. Like in the SEBL example, if hypothetically I would have considered a bearish position and find someone willing to risk 50k on OTM calls 1 week before expiration, I might postpone a week. No matter how you slice it, the calls are NOT a bearish position.

Some signals are crisp and clear:

http://www.sec.gov/news/press/2005-117.htm

While they get more sophisticated (like hiring Croatian women) this will probably never stop. Greed will prevail!

Another proven phenomenon like pinning is initiated in the option market. Independent of the motive for a trade, checking option activity for me is standard procedure.