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Strategies & Market Trends : Tech Stock Options

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To: ViperChick Secret Agent 006.9 who wrote (35859)	3/3/1998 12:24:00 PM
From: Electric	Read Replies (1) of 58727

Lisa, I wanted to expound a little on my earlier theory and I want all the opinions out there.. Remember our conversation yesterday and I said for the first time since I owned the DELL option it was over-valued as per the Black Scholes model? Well the time that I discussed it with you, DELL was + 2 to 3 for the day... then what happened? It fell.. for the first time since I held it... Remember us talking about the SPX and DELL last year and me telling you that all the positions are undervalued? What was the trend at the time? Up on all accounts.. My feeling is that the option pricing is possibly a future trend reading on a stock.. It is still under observation, but it might hold true... When a stock is rising, the options are undervalued due to the volitility.. I was talking to a big wig in finance about the MM stripping and the Options calculator and he said that more than likely the sigma is the reason for the discrepency, but he uses the efficient market theory to base his hypothesis.. So if the sigma is released and buy side volitility subsides, then the trend is lower... does this make sense???? So I am currently looking at a few stocks and seeing if current pricing is like a futures look at the stock... If this were to be true, this would be totally amazing.. So undervalument as per the Black Scholes means a bull trend and overvalument means a bear trend... I am going to test it... Opinions? this could be very valuable..

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