Minyan Mailbag: Doctor, Doctor, Gimme the News
An extra arm?
Editor's Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
1) I am noting with interest your post saying that August QQQQ strike 37 calls were being purchased in mass for .75 and .80.
Looking at the time in question, it seems they went below intrinsic. Perhaps my time is slightly off but at best these were sold by someone and there was no time premium on them. I am struggling to see why someone would want to sell 10's of thousands of options at those prices.
2) More importantly, and this goes with all the option data you publish, I have a hard time trying to figure out what if anything to do with the information. Is the implication that buyers of options know what they are doing and are going to be right and sellers the opposite? That does not seem to make a lot of sense to me.
Perhaps in the case of the QQQ someone is putting on a hedge of some sort but what does that mean to me? Therein lies the problem; I know you cannot give "advice" but unless there is a tradable interpretation, I am not sure what to do with the data. I would think that much of the time there is probably not a tradable interpretation, but if you make a trade on the basis of the data you post, can you at least say what it is you are doing without offering it as advice? I think this would not be much different than Toddo saying he is putting an extra arm in his bear suit.
The computers that run Doc's Blocks burped this morning and the info about the QQQQ was wrong for about 10 minutes. I just found this out when I got your e-mail. The options were puts trading for those same prices, not calls, but our comps dropped the 'p' for puts, so I thought we had some monster bull jumping in. I was wrong and am sorry if this confused you and other minyans. We've found why the glitch occurred and it shouldn't happen again.
As for what I think the best use of our info is, I will offer the following:
We take every print of every option, call or put, and sort by where that occurred - bid, offer or in-between. If they are buying calls on the offer, it's bullish. If they are buying puts on the offer it's bearish. A combo of buying calls on the offer and selling puts on the bid is extremely bullish, and conversely, buying puts on the offer and selling calls on the bid is extremely bearish.
As far as giving advice, I do that on my website but here in the 'Ville I play by the rules on education that we've laid out. I would say that if I'm talking about KRB trading blocks of calls on the offer, especially in light of the Providian buyout offer from WaMu, then I think higher bids are right around the corner. And if you see that I have a position in the equity (which I do and did state on that post) then you could interpret that I am putting an arm in my bull suit!
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