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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: Dan Duchardt who wrote (25)8/11/2001 11:20:13 PM
From: alanrs  Read Replies (1) of 1064
 
Okay, I think I see it. One of the reasons I'm trying to get more RAM is that I'm not able to use all the features of the Hoadley site.
Since I had only done ratio backspreads where the pink payoff line eventually just equals the main graph, I didn't run the elapsed time feature. I didn't realize the diagonal aspect would affect the whole position like it does.
One more dumb question. The reason I picked on the Jan 04 10 instead of the 5 is that the implied volatility is around 83% for it whereas the 5 is around 100%. Also, since it is a little cheaper my total outlay would be less.
Valid ways of looking at this?
Further, the Sept 15 and 20 are carrying volatility values of 108% while March is around 100%. The trade off then seems to be the total outlay, with the Sept's requiring $630 per unit (1 long and 2 short), vs about $170 per for the March. I am leaning to the March, only because I have a bias toward limiting my risk, especially in new situations, and have previously been more comfortable with more time. I don't have enough experience to know how big a factor an 8% difference in implied volatility is, so could very easily be overlooking something.

Is this making sense or is it way past my bed time?

ARS
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