Monday, May 23rd, 2016

How Analyst Recommendations May Affect Options Open Interest | Options like a DPM #5: Straddles


hamzeianalytics.com – While answering a question about Ford (F)’s options high level of open interest, The Admiral, A former CBOEDesignated Primary Market Maker (DPM), also explains how high open interests could be a phenomenon of analyst recommendations to retain traders such as through Charles Schwab. The Admiral says he has experienced times where the same types of orders flowed continuously when such analysts recommendations were made and, as a DPM, he could use options equalities to take the other side of the trade. This a Q&A excerpt from “Trade Options like a DPM Webinar #5: Straddles” – hamzeianalytics.com “STRADDLES” OPTIONS WEBINAR DESCRIPTION (October 6, 2010, 1800 CT) An options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date. ABOUT “THE ADMIRAL” The featured speaker, whom we affectionately call “The Admiral,” was a Designated Primary Market Maker (DPM) on the floor of the CBOE for five years. Although we’re not using his real name (so don’t ask!) suffice it to say that we consider him to be one of the most knowledgeable option traders on the planet. As a floor trader in the ’80s and ’90s he did the opening options rotation for 5-25 stocks the old-fashioned open outcry way—meaning he opened each option strike price for each of these stocks within the first 30 minutes of trading, both calls and puts. That meant he had to price more than 500 option strikes, plus as a market maker he traded

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