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Strategies & Market Trends : Waiting for the big Kahuna
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To: paulmcg0 who wrote (15154)3/19/1998 7:54:00 PM
From: Don Westermeyer  Read Replies (1) of 94695
 
FWIW, I think options are really a truly efficient mechanism in the market. Unless you are a good timer, or have insider information ,:), the only one who makes money is the specialist/market maker.

(1) Try to avoid stocks where the put premium is too high compared to the Black-Scholes price.

Beware if the model is the standard BS model that assumes log normal distribution, you will always find discrepancies in out-of-the-money options. That is because the log normal distribution does not really accurately describe typical stock price distribution (although it does a lot better than assuming normal distribution).

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