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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Tony B who wrote (7919)7/22/1998 8:30:00 AM
From: Herm  Read Replies (1) of 14162
 
I can't really say Tony! Perhaps something having to do with the implied volatility being higher than the historical volatility. Thus, the extreme value in the pricing. There are only three variables involved in the pricing:

1. Intrinsic value - actual dollar for dollar value. A $30 strike price when the stock is at $32.50 has an intrinsic value of $2.50.
As far as your question, it is obviously not intrinsic value that makes up the major part of the pricing.

2. Time value - There is some time lefted. So, ok there is value there.

3. Implied Volatility - As of this writing, CPQ has a volatility of 33.9% for the past 20-days and for a Half Year: 47.2%. Perhaps someone can give us an idea if that 33.9% is high.

That math is too much for me! Ask Doug!
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