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Strategies & Market Trends : Tech Stock Options

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To: Patrick Slevin who wrote (34521)	2/1/1998 1:22:00 PM
From: sergio	Read Replies (1) of 58727

Patrick, I am curious if these vol sellers stay for the terms/life of the option or they get out as soon as it comes back near the historical vol? Similarly, as vol rises more, do they just stay on their positions and wait it out (just like most of us) or they close out for a controlled loss? I am a novice at this so what do they do? I would think they should leg-in to a spread, assuming it's a call, buying a strike lower to lock-in or minimize the loss (due to skewing) and/or perhaps buying the underlying (again locks the loss). By the way, is it true that due to higher volatility and skewing, both puts and calls of same strike would tend to rise? For example, if the calls rose due to extended volatility, correspondingly the put would not drop as much? And would there be more of arbitrage opportunity due to mispricing (either wider spreads or perhaps option parity gets out of balance)? Sergio

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