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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Herm who wrote (4081)8/23/1997 12:50:00 AM
From: John B.   of 14162
 
Herm:

i was thinking about playing CYMI today since it appears to
be running hard into it's split date. I printed the option chains
with the following prices:

CYMI stock - 93 5/8 Time: 9:36 MST


Option ----- Premium ----- Time Value - (Strike price + prem. - stock price)
---------- ------------- --------------------------------
Nov 90 call ----- 14 3/4 ------ 11.12
Nov 80 call ----- 20 3/4 ------ 7.12
Nov 65 call ----- 32 5/8 ------ 4.00
Nov 60 call ----- 37 1/8 ------ 3.50

======================================================

CYMI stock - 97 1/2 Time: 2:02 MST

Option ----- Premium ------ Time Value
---------- ------------- -----------------
Nov 90 call ----- 16 1/4 ----- 8.75
Nov 80 call ----- 22 3/8 ----- 4.875
Nov 65 call ----- 34 1/2 ------ 2.00
Nov 60 call ----- 39 ------ 1.50

As you can see, the time value eroded significantly from
9:36 a.m. to 2:02 p.m. My question is how could the large
difference be explained? For instance, the stock at
9:36 a.m. was at 93 5/8 and the time value of the Nov 65 call
was 4.00. The stock was at 97 1/2 at 2:02 p.m. and the time
value of the Nov 65 call was 2.00. Why the sudden change
downward? Am i miss calculating something here? Please
explain the large change? Why didn't the in the money
premiums move up more? My final question is - if you were to
play this option, which play would you make?

Thanks for you help.
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