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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 210.32-5.6%Feb 6 9:30 AM EST
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To: Oeconomicus who wrote (1083)12/31/1997 7:08:00 PM
From: Todd Reichardt  Read Replies (1) of 164685
 
Hey Bob,

I still don't understand the large volume. Someone must want to either sell or buy or probably both.

Ok so for the person that is long the stock, they sell the call. And now they don't profit from any moves up in the stock above a certain point and they don't loose on the position unless the stock goes below 40. Doesn't sound like I'd be in a hurry to get into this position.

For the naked writer, I assume that writing a call that is far in the money has a large capital requirement. Am I wrong that you'd need to have capital that at least covers the amount that the option was in the money? I guess this position in terms of capital and risk/reward would be roughly the equivalent to shorting the stock.

For the option buyer, again this is a large capital requirement. Granted that there isn't a lot of premium on the option, but the leverage is only about 3:1 to owning the stock outright. If I expected this one to go up significantly, I'd be looking for more leverage. However, I must admit that there is a lot of premium in the calls that are less in the money or even out of the money. But again, I see no compelling reason to rush into buying the way in the money calls.

So who's got the motivation to trade $1.66 million worth of these options?

I don't get it

ramblin' Todd
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