Investing

Is there really manipulation of stock prices during option expiry days?

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Is there really manipulation of stock prices during option expiry days?

Is it really cheaper for big players to move the stock price and reap the benefits?

https://www.nytimes.com/2006/05/07/busi ... 7stra.html
https://seekingalpha.com/article/260747 ... ons-market

or it really just hedging pressure that helps drive/pin stocks close to option strike prices?
https://m.briefing.com/investor/Learnin ... ns-market/
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I have always believed that you cannot beat the computers and high frequency traders. Have you ever experienced chasing the bid or ask? And when every time you up your bid or lower your ask, the price seems to move farther away? That's computers at work. We will never be able to beat them. They are fast and they have more access to data than us mortals.

So I always completely ignore this and trade on fundamentals. I always place GTC orders when I am convinced about the price I am willing to pay or willing to receive. Same rules whether I buy options or stocks. Am I getting better value out of this? I am not sure. But what I know for sure is that I am paying/ receiving the price that make sense to me and that I am sleeping much better!! Smiling Face With Open Mouth
Why do you want to climb Mt. Everest, Sir? - Because it is there.

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also this -

"This clustering does not automatically mean that these stocks are being manipulated, the researchers say. It could also be caused by straightforward hedging transactions that are regularly undertaken by market makers on options exchanges."


It is a demand and supply situation where the price gravitates to the strike price when enough traders are doing exactly the same thing i.e. covering themselves against the identical risk. For example, the seller of a covered call at a given strike price faces the same risks as the other sellers who sold covered calls at the same strike price. To cover themselves, it can be argued that they would tend to make the same counter hedge as other traders in similar situation. I don't have an empirical evidence but I believe that's how the price gets influenced. When enough people react in the same fashion, the price gravitates in the that direction.

It is no secret that institutional are big players so naturally they are influencing the options market with their hedging strategies. Since we mortals cannot match their volume, it is them who are called market makers and not us.
Why do you want to climb Mt. Everest, Sir? - Because it is there.

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[OP]
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ruchir wrote: I have always believed that you cannot beat the computers and high frequency traders. Have you ever experienced chasing the bid or ask? And when every time you up your bid or lower your ask, the price seems to move farther away? That's computers at work. We will never be able to beat them. They are fast and they have more access to data than us mortals.

So I always completely ignore this and trade on fundamentals. I always place GTC orders when I am convinced about the price I am willing to pay or willing to receive. Same rules whether I buy options or stocks. Am I getting better value out of this? I am not sure. But what I know for sure is that I am paying/ receiving the price that make sense to me and that I am sleeping much better!! Smiling Face With Open Mouth
I think RBC filled my limit order for call options at $4.25 today. Bid was $4 and Ask was at $4.50/60 at that time. I was surprised it was an instant fill when earlier this morning I had put limit orders up to $4.40 with no takers. I'm sure their trader hedged the short call but hey, that's his/her problem now.

It wasn't for a big amount but it also wasn't too petty, at least for a retail investor like me.
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alanbrenton wrote:
I think RBC filled my limit order for call options at $4.25 today. Bid was $4 and Ask was at $4.50/60 at that time. I was surprised it was an instant fill when earlier this morning I had put limit orders up to $4.40 with no takers. I'm sure their trader hedged the short call but hey, that's his/her problem now.

It wasn't for a big amount but it also wasn't too petty, at least for a retail investor like me.
Options bid and ask are very wide and it is difficult to guess where the true fill lies in the range. I struggle with that too. If I really want it, I place my order closer to the bid (if selling) or ask (if buying).

Say, if bid ask is $4 and $4.80, I would place an order between $4.35 and $4.65 depending upon if I am buying or selling. It usually fills. I first try the price I want I.e. end of the range and then move towards the median.
Why do you want to climb Mt. Everest, Sir? - Because it is there.

— George Leigh Mallory

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