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Strategies & Market Trends : Tech Stock Options
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To: MonsieurGonzo who wrote (31546)12/18/1997 6:40:00 PM
From: Tom Trader  Read Replies (1) of 58727
 
>>But the OEKLK BIDxASK plummeted during that last 20 minutes, and ended up well below the original 2x3 ASK range, at 1-3/4 x 2 (!) <<

Steve--if you watch the premiums on the OEX options you'll see a close co-relation to the S&P futures. When the futures are trending up strongly you'll see that the calls are gaining premium at a rate that is far faster than the rate that the OEX index is gaining. The same thing happens with the puts -- as the futures are declining. I don't know where the futures were at the point when you entered your trade but I suspect that if you check out an intra-day chart, you'll probably find that the futures were rising. By the close the futures were in decline again.

Having said this I do agree with Nemer that trying to trade the OEX from the long side is something only the very nimble can do -- unless the market is trending strongly. This again is the reason why I have decided to trade them only on the short side -- the disadvantages are that the margin is huge and unless one is very disciplined there is the potential to lose a lot of money. Today I sold the OEXAK for close to 15 as the market was retracing -- now the index is close to 455 and the premium is at 12 3/8-12 7/8 with 4 weeks to go. This premium will literally whittle down with each passing day -- even if the index moves up marginally. It improves my chances of of having a successful trade, if I stay in the position for several days.

Hope you are having success overall -- trading is almost addictive in its own way. I have had a good day, all in all.

Regards
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