America On-Line: will it survive ...? Message Board

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Technology Stocks : America On-Line: will it survive ...?

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To: WryBoy who wrote (3145)	5/17/1997 2:37:00 AM
From: chenys	of 13594

Phil: When AOL was at 45 or so before it hit 22-5/8, I wrote a 6-month 60put for $15. The next morning I found it was wrong & quickly covered it for $16 at $1 loss. Spread between ask and bid was about $1 for long puts or calls. It then tanked to 22-23. I thought it'd bounce at 45 vigorously and my greed was obvious. Had I not closed it out, I'd have lost 22-23 at the worst time. The risk is the same as going long at the wrong time. Black-Scholes equation is for pricing option prices. Without mathmatical model and computer, a trader can simply look at the time value of the option to fig out the volatility. To compute the expected option price as the stock hits the target he can compare the in the money and out of money strikes and add the time value to the stock-strike price difference. Use lombard.com option link or cboe.com to obtain the option tables, including the open interests. Similar to Jim's strategy, I prefer to write puts after a base forming, which has better prob. for popping up.

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