Do you know what dynamic or delta hedging is? As a stock rises towards its strike price, near expiration, people who have sold calls buy stock to hedge. If a market is at all trendy, it may serve them to start buying half way between strike prices, and have almost a completely offsetting position the moment the strike price is crossed - meaning the buying stops.


Or, further from expiration, when gamma - the rate of change of delta (d1 = option price as a function of stock price) - is slower, stock and option prices may be offset by the amount of interest rates (because by buying a stock and selling a call and buying a put, you turn a synthetic future into a risk-free bond) the strike prices may actually be between the effective strike prices, so that if hedging activity tends to destabilize prices in the area of strikes, prices would more likely settle between strikes - which might coincide with rate-discounted strikes.


So far as simple support and resistance, sure, if there is an unsatisfied buyer (or correlated group of buyers) who appears - whatever that means - every time prices drop to where he is interested, chances are he will still be there again next time. More interesting, in markets where he actually is invisible, market-makers will pull together to let the price drop to where he is expected to show is face, just to confirm he is still there, and then they lift it with a fury before filling him.


Some people "trade for key levels" - on the statisticial basis that prices will be less stable between "information points" - and others view the market as a "pac man" - slowing chipping away at a key level (sounds more like "breakout" to me).


Burton Malkiel's discussion of technical analysis and key levels, in Random Walk, is as laughable as the rest of the book. But I'm no expert, study your own markets, and find out what "support" and "resistance" means for yourself. All I'm saying is there is plenty to be found wherever you look, and all of it worth pennies.


lorry