QQQ Options Expiration Strike Prices Acting As Magnets

Today is options expiration date, which means it’s a paring off day and a "strike-magnet" day.  If you look at the PowerShares QQQ (QQQQ-NASDAQ) with massive open interest in options that expire today, there are over 1 million contracts in the open interest for the APRIL07 options contracts of the closest Put Options and 450,000 contracts in the open interest of the closest Call Options.  Here is the open interst for each of the closest strikes today:

APRIL07 CALLS
$43.00    133,489
$44.00    166,340
$45.00    158,495
APRIL07 PUTS
$42.00    201,780
$43.00    338,268
$44.00    333,500
$45.00    199,342

Many will pare off against each other and some will roll-out to the May expiration (much lower open interest).  With open interest being this large and with the market gapping up today, it’s pretty difficult to think that the closest strikes aren’t going to act like magnets today more than other option expiration dates.  Unless there is major macro-news that hits, this is the likely outcome for tech stocks today.

Jon C. Ogg
April 20, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.