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Strategies & Market Trends : The Options Box

QQQ 626.14

+0.7%

Feb 2 4:00 PM EST

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To: Poet who wrote (5502)	9/24/2000 9:13:13 AM
From: dli	Read Replies (1) of 10876

Poet, as you know butterflies are a delta neutral strategy and are very well suited to take advantage of time decay in rangebound markets. I'm expecting INTC to remain in a rather tight range for some time after this drop (see LSI or NOK for analogous cases). While this will cause IV to gradually decrease, on Friday IV spiked due to the sudden drop and that gives you a nice entry point for a butterfly. There's a rather pronounced volatility skew between front and back month options now which makes a butterfly with October strikes look especially intriguing and also makes this situationa prime candidate for calendar spreads. If you want you can even introduce a bullish or bearish bias by positioning the butterfly above or underneath where the current market is trading, respectively. I hope this clarifies my thought process a little. Have fun on your trip to Italy. I'll be driving down there myself next weekend to visit a few friends in Firenze. Dave

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