why stocks close near option price?

[razor99]

just some of your opinions as to why stocks close near certain levels on options expiration????

 

[Landis82]

Quote from razor99:

just some of your opinions as to why stocks close near certain levels on options expiration????

Because the large amounts of open interest in the call and put options at a particular strike will cause market-makers who are usually short-vol to have to buy or sell stock to close out their positions.

 

[Equalizer]

This is not another "MaxPain" thing is it?

http://www.ez-pnf.com/ezpopt_1.htm

 

[123Magic]

Magic or manipulation, take your pick. Or maybe it the gravitational pull of those near term strike prices. No matter, options are a sucker bet.

 

[Landis82]

Quote from 123Magic:

Magic or manipulation, take your pick.

Yet another thought provoking post on ET these days.
:eek:

 

[a529612]

Quote from Equalizer:

This is not another "MaxPain" thing is it?

http://www.ez-pnf.com/ezpopt_1.htm

Or "Pin Action"?

 

[squeeze22]

Quote from razor99:

just some of your opinions as to why stocks close near certain levels on options expiration????

See where the money is going and pick your side. Takes research plus i don't think anyone will give away their work for free.

 

[basis]

1. There have been many, many studies done on this subject. The correct conclusion is that there is not a systematically exploitable bias to "pin". There are certain sectors of the market where you can trade it, but it tends to be in stocks that are on the illquid side ... so your poker skills had better be sharp.

2. Much more often than not, when a stock DOES pin, it's due to the fact that the market makers are LONG the strike. Their hedging of their position as expiry approaches makes them buyers of stock below the strike, and sellers above.