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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: Esteban who wrote (1014)5/5/2004 1:09:39 PM
From: Dominick  Read Replies (1) of 1064
 
Wide spreads are a PIA. I've seen MM's raise the offer 20 cents or more and the bid stays the same. With this kind of option, I first have to believe the stock is going to make a significant rally,(for calls), using TA methods.

If possible, I'll wait until it starts declining to a support area when the b/a narrows and the price drops during the decline. You'll have a better chance at getting it cheaper.

With YHOO now at 53.61 and May 50 at 4.20b/4.40a, your costs are $79 per contract due to being ITM. IV = 45.18% and 0.93 delta. YHOO has to move at least 4.8% to break even.

If buying calls I don't think it will make it. It's already hitting a resistance area.

dom
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