U. of I. study casts shadow on options trading

Discussion in 'Options' started by nitro, Oct 19, 2005.

  1.  
    #11     Oct 19, 2005
  2. Pabst

    Pabst

    Agreed. A "pattern" transitions from exploitable to untradeable.

    How about this though. Have you noticed some of the bizarre SPX settlements that come out of the opening prints? It's IMPOSSIBLE for me to believe that basis volatility like that isn't "purposeful" and because of it's opaqueness, impossible to gauge.
     
    #12     Oct 19, 2005
  3. nitro

    nitro

    #14     Oct 21, 2005
  4. ozzy

    ozzy

    If I was big enough, believe me I would try to manipulate stocks, why wouldn't they?

    Maybe I'm paranoid, I don't know. But the last 4-5 expirations on GOOG makes me think that my assumptions are correct.

    ozzy

    P.S You guys are going to think I'm crazy for saying this. But I also think a few institutions/HF's pulled GOOG down to 290 with pre hand knowledge of GOOG's earnings in order to snap up a shit load of options/shares at rock bottom prices.

    P.P.S I'm not a conspiracy theorist in any way and I actually do not like ppl who are. But I think there are some shady things going on this business. Someone tell me I'm wrong.??

     
    #15     Oct 21, 2005
  5. zdreg

    zdreg

    we know that students are not as smart as they once use to be but now comes the revelation:"THEY NEVER TRADED OPTIONS SO THEY ARE QUALIFIED TO TELL PEOPLE NOT TO TRADE OPTIONS??? ARE PROFESSORS DUMBER THAN WHEN I WENT TO SCHOOL??? NOW YOU KNOW WHY ONLY MORONS CITE ACADEMIC STUDIES TO PROVE POINTS..

    thx for the revelation:)
     
    #16     Oct 21, 2005
  6. wabrew

    wabrew

    Isn't it convenient that GOOG (340), SBUX (55) and others closed on the even money today. The researchers are correct.

    ......"Stock Price Clustering on Option Expiration Dates×
    Sophie Xiaoyan Nia, Neil D. Pearsona,*, Allen M. Poteshmana
    aUniversity of Illinois at Urbana-Champaign, Champaign, IL 61820, USA
    August 27, 2004
    Abstract
    This paper presents striking evidence that option trading changes the prices of underlying stocks. In
    particular, we show that on expiration dates the closing prices of stocks with listed options cluster at
    option strike prices. On each expiration date, the returns of optionable stocks are altered by an
    average of at least 16.5 basis points, which translates into aggregate market capitalization shifts on
    the order of $9 billion. We provide evidence that hedge re-balancing by option market-makers and
    stock price manipulation by firm proprietary traders contribute to the clustering......"
    ).
     
    #17     Oct 21, 2005
  7. phoenix3

    phoenix3

    This study is as good as the University of Illinois football team.
     
    #18     Oct 22, 2005
  8. #19     Oct 22, 2005
  9. You're so right! It's much easier to write about trading based on unrealistic assumptions without the inclusion of human factors.
     
    #20     Oct 22, 2005