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Politics : Formerly About Applied Materials
AMAT 260.78+0.2%9:30 AM EST
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To: Guy Gordon who wrote (33801)1/14/2000 11:38:00 PM
From: Ian@SI  Read Replies (2) of 70976
 
Guy,

For a moment, I thought that you were on to something.

1. Options are traded through Specialists who are charged with maintaining an orderly market. There's always a buyer and a seller. To see what the specialist does to ensure that he's not taking on excessive risk, read any of McMillan's books on Option Strategies.

2. Deep in the money options in most Semi Equipment companies would be highly illiquid. And if they're truly deep in the money, there's little, no or even a negative time premium. If you've written Covered Calls, then those shares can be called away at any time after you've written the option. ...especially if the time premium goes negative. At that point there's little point for the option holder to continue holding the option rather than take your shares and sell them. If you wrote naked calls, you've got 3 days max to deliver sufficient shares after being called.

Same story applies to writing deep in the money PUTs, except the PUT holder can assign the shares and you get the privilege of buying them at the agreed to strike price.

++++++++

It would appear that you have some Options education to acquire before further advising others on very high risk options strategies. At the very least, it would be worthwhile to let others know that they might well be taking some risks that they didn't really expect existed.

FWIW,
Ian.
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