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To: Win-Lose-Draw who wrote (138795)12/17/2001 9:48:42 AM
From: yard_man  Read Replies (1) of 436258
 
premium is always greatest at or near the money, since at that point a given %-age move in the preferred direction increases the intrinsic value (resulting value at expiration) by the largest percentage

suppose you have the 50's ~ intrinsic worth of 10 -- qqq's drop to from 40 to 39 -- you've got a 10% increase in your put for ~ 1/40 decrease in the underlying as the puts become worth 11. if the qqq's decrease another pt to 38 the value of the 50's increase from 11 to 12 -- a smaller %age increase

now suppose you have the 40's (puts), qqq at 40, and qqq's drop to 39. Intrinsically your put was worth 0 -- now it is intrinsically worth 1 -- should the qqq's drop by another pt they'll be worth 2 -- doubling in value -- you see the higher gearing -- more value for the time or opportunity for you there??
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