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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Uncle Frank who wrote (759)	5/24/2001 12:44:41 AM
From: Uncle Frank	Read Replies (2) of 5205

John, in my reply to your play on nufo, I commented that "The premium looks rich, due to nufo's high beta", and was promptly taken to task by one of the experienced options traders on the thread. He was kind enough to do it by PM so I could save face, but since have no allusions that I am anything other than a pilgrim (dummy), I have no problem in exposing my confusion in interchanging the words beta and volatility. Beta (as defined by the cboe): A measure of the volatility of a stock relative to the overall market. A beta of less than one indicates lower risk than the market; a beta of more than one indicates higher risk than the market. Nasdaq.com uses the S&P 500 as the underlying index to measure the overall market for beta. Volatility (McMillan - glossary -p871) Volatility is the measure of the stocks price movement around its own price - standard deviation to its average. Perhaps one of the wunderkind (Ethan or Mathmage) will be kind enough to offer a mathametical explanation of the difference between the two terms in practical applications. That'll teach me to use big words without knowing what they really mean. duf@meaculpa.com

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