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Strategies & Market Trends : The Options Box

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Oct 31 4:00 PM EDT

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To: Poet who wrote (10800)	5/27/2001 8:43:57 AM
From: tyc:>	Read Replies (1) of 10876

I'm all confused. Can someone straighten me out ? Message 15838359 I believe that the solution to my problem lies in the answer to this question ; How would the market determine the fair value of an option to buy one ounce of gold at a price of $220 four years from now, when the current price of gold is $285 ? It is my vague understanding that the fair value of options is really determined by an arbitrage situation. If any one factor in the arbitrage gets out of line, arbitrageurs would quickly force it back to fair value. If this is correct, what is the arbitrage equation that would detrmine this value ?

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