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Biotech / Medical : Biotech Valuation

CRSP 55.28

+5.3%

Nov 17 3:59 PM EST

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To: f_mcknuckles who wrote (13342)	10/6/2004 2:15:33 PM
From: Sam Citron	Read Replies (2) of 52153

Options seem way underpriced in general. Stock volatility is at about an eight year low right now. These two statements appear to be contradictory to me (unless you mean underpriced compared to historic norms, which is not very interesting) as low volatility directly causes low option prices. That said, CTIC option premium seems anything but underpriced to me. Thank you for the colorful expressions you cited pointing to the potential dangers and foibles of "volatility selling", but I would be more interested in understanding the actual downside of the cc write strategy that I am proposing. I am certain that the market will be happy to teach me what I need to know, just as I am confident that "revealed preference" is an adequate substitute for 95% of all dialog about valuation. You suggest that a strategy that yields over 20% in 5 months assuming a stagnant stock price is like "running in front of a steamroller and picking up nickels"? Please elaborate, for I fail to see the analogy. Sam

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