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American Capital Agency Corp. Message Board

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  • JetCityExpo JetCityExpo Jun 8, 2012 12:10 PM Flag

    OT: Interpreting open interest

    From a technical stand point, this makes sense. For example, if you bought calls (long) that are now ITM, the MM sold them to you (short) and then purchased shares of stock to correspond to the delta. When you sell your ITM option to collect the fatty premium, and close your position, the MM does the opposite. Buys the option back to close, and sells his shares to cover your profit. The selling of these shares affects the stock price. As more investors close positions, the stock price gets driven to the strike where maximum equilibrium is achieved. Remember that when the stock price is falling, more puts are coming into the money.

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