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Strategies & Market Trends : Three Amigos Stock Thread
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To: Sergio H who wrote (1292)3/2/1998 3:02:00 PM
From: Sal D  Read Replies (2) of 29382
 
Sergio I think I understand. One thing for sure is there are so many stratiges to choose from one must decide witch one is right for them. I would however like to explain my analaysis on the NRL options as to possibly learn more and also check my method for possible mis understanding on my part.

Again I am using info from Friday 2/27 close for purchase data. I used a interest rate of 5.14 and the .16 annual dividend in my calculations, I also used a projected closing price of 26 on March 20th (in essence the day the March 20 calls expire).

First lets look at the March 20 calls at 3 5/8.
On March 20 you exersise your option you get 100 @ 20.00 = 2,000.00
The premium you paid was 362.50 = 2.362.50
You sell 100 @ 26.00 = 2,600.00
You make 600.00 - 362.50 (the premium) = 237.50 (65.5% profit)

Now lets look at the June 25 calls at 1 11/16
Using the same calculation date (2/27)and the same numbers we used for the March 20th calls I get a volatility rating of 42.7869
Now if I recalculate the June 25 calls with a new calculation date of March 20th(the expiration date of the March 20 calls) and a close price of 26 (witch was used in the March 20 calls calculations) and use the volatility rating of 42.7869 (derived from the original calculation on 2/27 of the June 25 calls) I get an estimated price for the June 25 calls at 2.86597

I paid 1 11/16 (1.6875) on 2/27 for the June 25 calls now on 3/20 there selling for 2.86597.

I sell the call I originaly purchased for 1.6875 at 2.87597 (69.8% profit)

Also if on March 20th the stock price is were it is now (23 5/8) my March 20 call is at breakeven but my june 25 call has 3 months to possibly get in the money.

I understand there are many ways to trade options. I am in no way disputing anyones methods I am only trying to gain a better understanding and check my method of interpertation to see if I have mis understood something for I am new to option trading.

Joe
P.S. Spell check is off hope I dident do to bad
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