Price of options:
Tell me if I'm off here. A little lesson on option pricing.
I picked up Nov 110 puts on YHOO for 8 1/8 when the stock was trading at 127 (paying for approx 14% drop).
An equivlent put on GIFI, trading at $16 1/2 would be Nov 14's. There aren't any, but 15's go for 1 3/8. We'll say 14's should trade for an even $1.
$1 on GIFI 14's would require a $13 price on the stock to break even, a 22% drop.
8 1/8 on YHOO 110 would require a $102 price to break even, a 20% drop.
Now if you look at Nov. 125 puts on MRK, you are only paying 5 3/8ths. Assuming they had 110's (like Yahoo), I'm guessing you're going to pay around $3. Compared to Yahoo's, they're cheap. That said, the chance of Yahoo dropping 20 point on Monday is a lot more than MRK doing the same. Frankly, I would rather buy the Yahoo puts even though they are expensive relative to less volatile stocks, but that's what you are paying for...volatility.
Right?
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