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Strategies & Market Trends : Options
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To: Bridge Player who wrote (2275)2/5/2000 2:50:00 PM
From: edamo  Read Replies (1) of 8096
 
b.p...."all of the option price reflects "time premium" "

"time premium" is a minor, calculable component of an otm strike...the major, or variable component is "implied volatility".....if it was just "time" it would be no fun... the implied volatility is the component that gives rapid price changes in the premium in a fast moving or momentum issue. the idea of option trading is to capture any inflated implied volatility, which is yours to keep when a normalization of volatility occurs.
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