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Biotech / Medical : Biotech Valuation
CRSP 51.46-2.0%9:33 AM EST
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To: f_mcknuckles who wrote (13342)10/6/2004 12:52:09 PM
From: Biomaven  Read Replies (1) of 52153
 
Options seem way underpriced in general.

I'd agree on that one, particularly with the elections coming up and the presumed increased potential for an attack by a terrorist group (like Madrid).

Option pricing in practice takes into account the fact that markets have fat tails - that's why you see the so-called volatility "smile" or "smirk" if you plot the implied volatilities for near-term options - the out-of-the-money options will show higher implied volatilities than do the at-the-money options.

Peter
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