Bill Wexler's Dog Pound Message Board

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Non-Tech : Bill Wexler's Dog Pound

REFR 1.847

-0.2%

3:50 PM EST

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To: Mama Bear who wrote (1479)	6/22/1999 6:32:00 PM
From: Q.	Read Replies (1) of 10293

If IRID shares are hard to borrow, are the options worth a look? I won't touch options on a little stock because the transaction costs and spreads are too high, but IRID is big, and the open interest on most options is well into the thousands. I just took a look at the IRID options chain. Implied volatilies are around 200, while the actual volatility is only about 88. So there is a lot of premium in these options that you might be able to extract by writing them. Working with August 99 options, you could write a 10 call for 2 and buy a 12.5 call for 1.38, allowing you to pocket 0.62. You would also pocket $0.62 for October calls. (These prices are with the stock at 10 5/16, and they assume selling at the bid and buying at the ask, while you might be able to do better.) Your worst-case scenario would be losing 1.88. It might be worth waiting for a bigger bounce before trying this, though.

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