If options are responsible for more than half of a markets liquidity, how do puts and calls affect the price of the stock on expiration/end of week?

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So let’s say, majority of traders were predicting the indexes to go down this week due to bad economic news, this means most of the people bought puts, the market did indeed drop a bit so the traders are interested in exercising their puts and taking profits a day before expiration (assuming most of the options are short term, up 0DTE)

How would mass put exercise affect the stock price, would it go up or down?

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3 Answers

Anonymous 0 Comments

You have to remember that for someone to buy a put, someone else had to sell the put. So “most people” cant buy puts as they can only buy what’s being sold. At that point, if the options were exercised, it would just show up as a transaction with the put buyer selling the stock to the put seller. The “market price” is essentially just a moving average of those transaction prices.

Anonymous 0 Comments

You have to remember that for someone to buy a put, someone else had to sell the put. So “most people” cant buy puts as they can only buy what’s being sold. At that point, if the options were exercised, it would just show up as a transaction with the put buyer selling the stock to the put seller. The “market price” is essentially just a moving average of those transaction prices.

Anonymous 0 Comments

You have to remember that for someone to buy a put, someone else had to sell the put. So “most people” cant buy puts as they can only buy what’s being sold. At that point, if the options were exercised, it would just show up as a transaction with the put buyer selling the stock to the put seller. The “market price” is essentially just a moving average of those transaction prices.