BRE-X, Indonesia, Ashanti Goldfields, Strong Companies. Message Board

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Gold/Mining/Energy : BRE-X, Indonesia, Ashanti Goldfields, Strong Companies.

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To: Karl Zetmeir who wrote (19407)	4/29/1997 9:21:00 PM
From: Porter Davis	of 28369

<<If you want to sell ... you sell at the bid ...>> I'm afraid Mr. Zetmeir has slightly misrepresented how the auction process works on the principal N. American option exchanges. Each exchange appoints either an individual or a small group of professional traders who are obligated to call two-sided continuous markets on every series. (For Bre-X in Toronto, this has been as many as 80 series). There is no hard and fast method for pricing options--there are several formulas which provide a framework, but implied volatility, or what investors are willing to pay or sell options for is the unknown factor. If you think the markets the specialists are calling are too cheap, you buy them. If you think they're too dear, you sell them. You may also bid or offer, at the risk of 'missing the market'. It's called an auction. It's a fallacy to believe specialists make money by trading the 'spread'. A 'wide' spread just means there are no other buyers or sellers. For a more detailed discussion, try : techstocks.com For what its worth, I think the Bre-X specialists in Toronto have done a remarkable job with a tremendously difficult stock. Nothing can protect you when the underlying gaps from $15.50 to $2.50 overnight. I know that what one of them lost that day would be enough to buy a comfortable house in Toronto. If it were as simple as 'making book' and living on the spread, the floor would be so crowded you couldn't move. It also doesn't account for the 20-25% turnover we suffer annually in options traders on the floor. No salary, no job security, having to make trades you really don't want to make...its not for everybody. If you would like to try it out, Mr. Zetmeir, give me a call and I'll bring you on the floor in Toronto and you can see for yourself. Happy trading. Porter Options specialist in ABX, N, and BCE

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