Identix (IDNX) Message Board

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Technology Stocks : Identix (IDNX)

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To: Buck who wrote (4971)	11/12/1997 5:54:00 PM
From: Hockeyfan	Read Replies (1) of 26039

Current options? First of all, I am not a stockbroker and anything I say is only my opinion. You should definitely play your first several trades on paper. The general rule of thumb is to sell volatility when it is high and buy when it is low. IDX's volatility measure used for options pricing has always been very high, the calls more than the puts. If you think IDX has hit rock bottom the best options trade would be to sell March $7.5 puts at 3/8. These options have implied volatility of 66% vs. 22% for the S&P500. The option holder will not put the stock to you (make you buy it at $7.50 per share) unless the stock goes below $7.50 between tomorrow and 3/20/98. You must be prepared to buy the stock at the discretion of the option holder if the stock price falls below $7.50 (actually $7.25ish do to transaction costs.) This would be a better trade if IDX hit $8.50 or so. Your premium would be higher and you could feel stronger that we hit rock bottom. I would not sell calls now in case we rebound to the middle of our trading range - $10 to $10.50. Only buy options with high volatility if you are CERTAIN the price will move in your direction.

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