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Strategies & Market Trends : Advanced Option Strategies

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To: OX who wrote (327)	3/30/2000 11:45:00 AM
From: tyc:>	Read Replies (1) of 355

Here is an extract from a PM you sent me in February, in which you very ably described the differences between your strategies and mine. <<"pps. maybe this brings up a good point... I would rather short strangles than straddles since you have a wider profit zone (albeit a smaller overall profit)...." I agreed with everything you said in the PM. However, in my last comment to this thread I made a contentious statement that I thought you might challenge; <<Because the "distribution of stock prices" are NOT log-normal (as the Black-scholes model implies); one must expect far more activity in the "tails" of the distribution curve. This is not something I conjured up, but rather something my reading suggests has been proven statistically. It seems to me that if this is true, AND if the option premiums offered have been calculated according to Black Scholes, then the premiums offered for O/M strangles do not adequately compensate for the risks incurred. And it validates Taxman's "buy OM call" strategy for a bull market scenario. ---

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