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Post by mcharliem on Jan 17, 2014 7:22:44 GMT -8
Could someone please explain to me how option trades are causing a pin in PM when options aren't even trading yet? You obviously don't even understand pain theory if you think option trading itself causes the pin. Nobody has ever said that as far as I know. Pain adherents believe trading of the underlying stock causes it. Perhaps you should actually learn the theory, then criticize it. Until then, don't believe your lying eyes. Could someone give me a brief explanation of this pinning theory you're referencing? I've explained my own pinning theory in great detail on here before, but my theory does not support any pinning behavior in this morning's premarket.
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Post by po1nt on Jan 17, 2014 7:34:15 GMT -8
Getting closer...
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JDSoCal
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Aspiring oligarch
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Post by JDSoCal on Jan 17, 2014 7:46:25 GMT -8
Could someone give me a brief explanation of this pinning theory you're referencing? 1) Option trading in Apple is dominated by retail. Jon Najarian, who co-owns Trademonster, has said this repeatedly. 2) Retail overwhelmingly buys long options (or long spreads), rather than opening short positions. 3) Market makers (and other institutions) write these positions. It is why they exist, to provide liquidity on demand. 4) Market makers trade the underlying AAPL accordingly as one form of hedge to cause maximum "pain" according to open interest to prevent paying off positions they have written. 5) Other institutions, whose quants are well in the know about pain effects and have written algorithms to capitalize on pain, trade underlying accordingly as well (they also trade options with pain in mind). Market makers do not need to do massive buys or sells to move AAPL - other institutions' algos react instantaneously to buys or sells, further exacerbating the effect (self-fulfilling prophecy, to a degree). Or so the theory goes. Bottom line, it doesn't matter why the pin happens, if it happens. And if it does happen, LEAPS expiry is one time you can count on it due to 2 years of open interest piling up. So trade accordingly.
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Post by macwire on Jan 17, 2014 7:54:28 GMT -8
Could someone give me a brief explanation of this pinning theory you're referencing? 1) Option trading in Apple is dominated by retail. Jon Najarian, who co-owns Trademonster, has said this repeatedly. 2) Retail overwhelmingly buys long options (or long spreads), rather than opening short positions. 3) Market makers (and other institutions) write these positions. It is why they exist, to provide liquidity on demand. 4) Market makers trade the underlying AAPL accordingly as one form of hedge to cause maximum "pain" according to open interest to prevent paying off positions they have written. 5) Other institutions, whose quants are well in the know about pain effects and have written algorithms to capitalize on pain, trade underlying accordingly as well (they also trade options with pain in mind). Market makers do not need to do massive buys or sells to move AAPL - other institutions' algos react instantaneously to buys or sells, further exacerbating the effect (self-fulfilling prophecy, to a degree). Or so the theory goes. Bottom line, it doesn't matter why the pin happens, if it happens. And if it does happen, LEAPS expiry is one time you can count on it due to 2 years of open interest piling up. So trade accordingly. Yup. Anyone going long circa the close today?
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Post by phoebear611 on Jan 17, 2014 7:59:35 GMT -8
I plan on going longer later today FWIW
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Post by po1nt on Jan 17, 2014 8:02:02 GMT -8
1) Option trading in Apple is dominated by retail. Jon Najarian, who co-owns Trademonster, has said this repeatedly. 2) Retail overwhelmingly buys long options (or long spreads), rather than opening short positions. 3) Market makers (and other institutions) write these positions. It is why they exist, to provide liquidity on demand. 4) Market makers trade the underlying AAPL accordingly as one form of hedge to cause maximum "pain" according to open interest to prevent paying off positions they have written. 5) Other institutions, whose quants are well in the know about pain effects and have written algorithms to capitalize on pain, trade underlying accordingly as well (they also trade options with pain in mind). Market makers do not need to do massive buys or sells to move AAPL - other institutions' algos react instantaneously to buys or sells, further exacerbating the effect (self-fulfilling prophecy, to a degree). Or so the theory goes. Bottom line, it doesn't matter why the pin happens, if it happens. And if it does happen, LEAPS expiry is one time you can count on it due to 2 years of open interest piling up. So trade accordingly. Yup. Anyone going long circa the close today? If we can get to the gap-fill I'm more inclined to. Also on pain; I agree. I keep it pretty simple. There are people with lots of money and resources out there, and if they think that can profit from it (or anything for that matter) weather it be "real", self-fulfilling, mystical, or whatever, they will do it.
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Post by mcharliem on Jan 17, 2014 8:02:57 GMT -8
Point 1-3 are just the lead in. Point 5 seems to be a self-fulfilling explanation.
It's Point 4 that seems to be the key to your theory and is the one I have the most problem with. Market makers are always hedged, unless they have a bias of course. But any bias is going to be an independent decision from when they write options to retail investors. Some may have a long bias, some may have a short bias, but across the entire market there won't be any significant bias on one side or the other.
But the key area where this theory breaks down is, if market makers are hedged (they certainly are) then why do they have an incentive for the stock to get pinned? As I've said before, option writers actually have a huge incentive for the stock not to get pinned, it's called "pin risk". Believe me, from working on an options desk, it's a real concern and something we want to avoid at all costs. But your whole theory seems to based on options market makers trying to seek out pins, which is absolutely false. I can't see how anyone who has traded options professionally would subscribe to this theory.
As I've said before, I believe that pinning is a real phenomenon, but I think it's entirely misunderstood and misinterpreted.
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JDSoCal
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Aspiring oligarch
Posts: 4,189
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Post by JDSoCal on Jan 17, 2014 8:25:23 GMT -8
As I've said before, I believe that pinning is a real phenomenon, but I think it's entirely misunderstood and misinterpreted. I'm an investor, not an econ professor, so I'd rather just recognize trends than debate why they happen. Let's just say, ignore monthly and especially LEAPs expiry at your peril. *** Anyway, hoping for a lot of Chinese getting iPhones under their New Year's tree, or wherever it is Chinese put their presents. Oh, and ha ha Samsung, your attempt to copy Apple has hit a snag: Truth is, I am almost rooting for Tizen to launch to decimate Android. It's like Kissinger said about the Iran-Iraq war, "Too bad they both can't lose."
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Post by artman1033 on Jan 17, 2014 8:34:18 GMT -8
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Mav
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Post by Mav on Jan 17, 2014 8:55:12 GMT -8
If I can't trust Apple, there's no use trusting any technology company. C'mon.
Also, context?
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Mav
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Post by Mav on Jan 17, 2014 8:58:47 GMT -8
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Post by artman1033 on Jan 17, 2014 9:08:23 GMT -8
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Post by artman1033 on Jan 17, 2014 9:19:57 GMT -8
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Post by nagrani on Jan 17, 2014 9:37:01 GMT -8
Mav - stop spamming this msg board with your nonsense Just kidding - look forward to reading all your good stuff this weekend
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Post by hledgard on Jan 17, 2014 9:46:42 GMT -8
Just a great article. I did not know what people meant here until I read this article. Thanks !
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JDSoCal
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Aspiring oligarch
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Post by JDSoCal on Jan 17, 2014 10:18:21 GMT -8
BTO 550-555 BPS @ 1.75. (Wed) STC 550-555 BPS @ 4.75. (Today)
Fuck thank you, option pain, that was great. I won't say how many contracts, as it would give Lovemyipad conniptions. Suffice it to say, it's the most contracts I have ever traded in a single trade. God bless random supply and demand price action!
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chinacat
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AAPL Long since 2006
Posts: 4,433
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Post by chinacat on Jan 17, 2014 10:20:30 GMT -8
Any of the resident armchair analysts here want to hazard a guess what the recently announced intent by Nextel in Brazil to begin offering the iPhone could add to 2014 revenues/earnings? Here are a few "facts" randomly pulled from the internet.
BRAZIL Smartphones: According to consulting firm Frost & Sullivan, 15.5 million smartphones were sold in Brazil in 2012 and in 2013, more than 21.4 million smartphones will be sold in Brazil. Overall, smartphones will account for 35% to 40% of all mobile phone sales in Brazil in 2013. According to Kantar Worldpanel, Android operating system has 56.7% market share in the Brazilian smartphone market, followed by Symbian (31.5%), with much smaller percentages for the other operating systems. However, when it comes to companies that distribute smartphones to their employees, IDC reports that RIM has around 41% market share (double the amount of the nearest competitor) in both smaller (0-250 employees) and larger (250+ employees) companies.
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Post by archibaldtuttle on Jan 17, 2014 10:33:08 GMT -8
BTO 550-555 BPS @ 1.75. (Wed) STC 550-555 BPS @ 4.75. (Today)
Fuck thank you, option pain, that was great. I won't say how many contracts, as it would give Lovemyipad conniptions. Suffice it to say, it's the most contracts I have ever traded in a single trade. God bless random supply and demand price action! Congratts, JD. I did well on my bearish spreads too. But I've been pretty surprised by last hours's whoosh down to 545. I was sure we'd be hanging around 550 all day.
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Post by macwire on Jan 17, 2014 11:32:44 GMT -8
BTO 550-555 BPS @ 1.75. (Wed) STC 550-555 BPS @ 4.75. (Today)
Fuck thank you, option pain, that was great. I won't say how many contracts, as it would give Lovemyipad conniptions. Suffice it to say, it's the most contracts I have ever traded in a single trade. God bless random supply and demand price action! Time to ride the wave instead of letting max pain bend us over. Let's get in on the action. Well played, sir.
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Post by incorrigible on Jan 17, 2014 11:40:07 GMT -8
Frustrating that my investments with the worst fundamentals are doing the best re. share appreciation. :/
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Post by aapl4kiki on Jan 17, 2014 11:51:19 GMT -8
Just a little over an hour left til monthlies expire. Plenty of time for them to get us down further. #500callwallstillalive
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Post by archibaldtuttle on Jan 17, 2014 11:54:54 GMT -8
From an efficient market standpoint, the daily trading in AAPL couldn't become any more of a joke. AAPL is back to where it was when everyone thought the China Mobile deal was not going to happen. So I guess actually launching the deal is worth exactly the same as the deal not happening? Hilarious.
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Deleted
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Post by Deleted on Jan 17, 2014 12:36:15 GMT -8
I said I was going to be fucking ecstatic if we finished anywhere near $550 this week.
Oh well, should have trusted my instinct that we wouldn't see it.
Well done with your trade JD.
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Mav
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Post by Mav on Jan 17, 2014 12:37:34 GMT -8
No sustained 550+ = still more rangebound-ish, thrashy purgatory until China Mobile data point or earnings. Whee.
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Post by Red Shirted Ensign on Jan 17, 2014 12:40:34 GMT -8
No sustained 550+ = still more rangebound-ish, thrashy purgatory until China Mobile data point or earnings. Whee. I'm sick of it..
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Post by aapl4kiki on Jan 17, 2014 12:42:37 GMT -8
20 more min to get us down $40.
Fucking bastards.
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Deleted
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Post by Deleted on Jan 17, 2014 13:07:32 GMT -8
I'll take $540. Not terrible compared to last year.
Market closed Monday, meaning we only have 5 more trading sessions before earnings are announced.
Bring it on.
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Post by macwire on Jan 17, 2014 13:08:31 GMT -8
Anyone take a taste long?
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Post by phoebear611 on Jan 17, 2014 13:12:35 GMT -8
Moi
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Post by lovemyipad on Jan 17, 2014 13:16:11 GMT -8
Back to the drawing board...
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