4 ms·

This is on Hacker News why? Daily stock market quotes are like comments or articles on gossip blogs - it's the opinion of ~0.001% of the market for ~1 second -

This is on Hacker News why? Daily stock market quotes are like comments or articles on gossip blogs - it's the opinion of ~0.001% of the market for ~1 second - and the opinion that they give is usually wrong.

drchiu 14y ago
I think unless you've played with options, you won't have a clue why a close like $500 is a big deal. This basically causes all calls/puts option contracts on either side to be worthless. It is commonly accepted "fact" (note the quotations) that stock prices are manipulated to some degree on options expiration days to minimize losses of contract writers, who could typically be traders from hedge funds or from some investment bank.
- deleted 14y ago
  [deleted]
- keithwinstein 14y ago
  I don't quite follow. Exchange-traded options are American-style options -- they can be exercised any day until the expiration date. Somebody who owns a call option @ $500 can exercise it profitably as long as the bid goes above $500 at any point before it expires. Why is the closing price on the last day so important?
  - confluence 14y ago
    Margin. It's always about margin.
  - wiredfool 14y ago
    Because the option is almost always worth more to sell than to excercise, since the price of the option is the intrinsic value + the time value. The time value goes to zero as the expiration gets closer, where the intrinsic value depends on the price. E.g., if you took an at the money (just at 0 intrinsic value) option for a year out, the price might be 20% of the strike price. That 20% will slowly fade over the course of the year. (Or possibly go up, if the volitility of the stock goes way up). If, in 6 months, your stock was in the money a bit, the option would still be worth more than the intrinsic value. (though, dividends can mess with that, and some people excercise options early to catch dividends)
  - btian 14y ago
    wiredfool is almost right except in the case for dividend paying stocks. It could prove profitable to exercise before expiry date if the investor thinks the company is going to raise dividend because option holders don't receive dividend.
  - encoderer 14y ago
    Exactly. The expiration is the friday before the 3rd saturday of the expiration month -- which is quarterly. So calls and puts sold during the price run-up the last few months expired today. That said, I don't really believe the manipulation story. Perhaps a small amount of market manipulation occurred, but it's not the reason AAPL is in a slump. For that, I think mental state and market sentiment are far far more powerful factors.
    - thingylab 14y ago
      Quick correction here: AAPL has weekly, monthly and quarterly options. Weeklies expire every friday (except on fridays when it is also a monthly expiry - the third friday of every month). Quarterlies expire the last business day of march, june, september and december.
- thingylab 14y ago
  What ?!? I can't believe the amount a bullshit about options I see here. If, at expiry, the spot is 'x', puts with strikes > x are worthless and calls with strike < x are worthless too. This is true for any x, indepently of HN's belief that x is somewhow magical.
Steko 14y ago
The stock dropped from $550 two weeks ago and there was much discussion about whether this was stock price manipulation or whether the quarter was disappointing. Of course it could be both. The former now looks certain and we'll find out if it's the latter on Tuesday.
alayne 14y ago
$500 is a target related to alleged stock manipulation. http://daringfireball.net/linked/2013/01/15/suppressing-aapl http://daringfireball.net/linked/2013/01/15/suppressing-aapl

drchiu 14y ago

I think unless you've played with options, you won't have a clue why a close like $500 is a big deal. This basically causes all calls/puts option contracts on either side to be worthless. It is commonly accepted "fact" (note the quotations) that stock prices are manipulated to some degree on options expiration days to minimize losses of contract writers, who could typically be traders from hedge funds or from some investment bank.

deleted 14y ago
[deleted]
keithwinstein 14y ago
I don't quite follow. Exchange-traded options are American-style options -- they can be exercised any day until the expiration date. Somebody who owns a call option @ $500 can exercise it profitably as long as the bid goes above $500 at any point before it expires. Why is the closing price on the last day so important?
- confluence 14y ago
  Margin. It's always about margin.
- wiredfool 14y ago
  Because the option is almost always worth more to sell than to excercise, since the price of the option is the intrinsic value + the time value. The time value goes to zero as the expiration gets closer, where the intrinsic value depends on the price. E.g., if you took an at the money (just at 0 intrinsic value) option for a year out, the price might be 20% of the strike price. That 20% will slowly fade over the course of the year. (Or possibly go up, if the volitility of the stock goes way up). If, in 6 months, your stock was in the money a bit, the option would still be worth more than the intrinsic value. (though, dividends can mess with that, and some people excercise options early to catch dividends)
- btian 14y ago
  wiredfool is almost right except in the case for dividend paying stocks. It could prove profitable to exercise before expiry date if the investor thinks the company is going to raise dividend because option holders don't receive dividend.
- encoderer 14y ago
  Exactly. The expiration is the friday before the 3rd saturday of the expiration month -- which is quarterly. So calls and puts sold during the price run-up the last few months expired today. That said, I don't really believe the manipulation story. Perhaps a small amount of market manipulation occurred, but it's not the reason AAPL is in a slump. For that, I think mental state and market sentiment are far far more powerful factors.
  - thingylab 14y ago
    Quick correction here: AAPL has weekly, monthly and quarterly options. Weeklies expire every friday (except on fridays when it is also a monthly expiry - the third friday of every month). Quarterlies expire the last business day of march, june, september and december.
thingylab 14y ago
What ?!? I can't believe the amount a bullshit about options I see here. If, at expiry, the spot is 'x', puts with strikes > x are worthless and calls with strike < x are worthless too. This is true for any x, indepently of HN's belief that x is somewhow magical.

Steko 14y ago

The stock dropped from $550 two weeks ago and there was much discussion about whether this was stock price manipulation or whether the quarter was disappointing. Of course it could be both. The former now looks certain and we'll find out if it's the latter on Tuesday.

alayne 14y ago

$500 is a target related to alleged stock manipulation. http://daringfireball.net/linked/2013/01/15/suppressing-aapl http://daringfireball.net/linked/2013/01/15/suppressing-aapl