Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 267.87

-0.6%

Dec 5 9:30 AM EST

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To: Dr. Bob who wrote (23229)	8/24/1998 12:31:00 PM
From: Robert O	Read Replies (1) of 70976

Dr. Bob I think your concept here is a pretty good "call." (Uggg) My concerns are that the pricing of many options is somewhat unfair but it's not readily testable by myself. More interesting is a conversation I had recently with a hedge fund trader: Me: Isn't it interesting that 90% of all options expire worthless (I borrowed this stat. from Ben's website and it's well founded elsewhere). Trader: True, but in absolute dollar terms watch out. Of the 10% that have value, many times option sellers will get hammered for much of the profit that had been accumulating using the selling option strategy. Consider the call seller who woke up one morning to find out that Chrysler was being bought out by Mercedes Benz. OUCH. Now, I realize you're talking about a covered call. For frequent traders out there can someone please let us know what the very worst possible outcome could be using Dr. Bob's strategy? I'm always naked <g> so have not fully considered the implications in real world application. I'm sure AMAT has full time players buying the underlying and playing the options...whadya say? Robert O

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