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Strategies & Market Trends : Daytrading OEX options with a method, not a trading system
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To: HiSpeed who wrote (29)10/13/1998 10:18:00 PM
From: Mark Z  Read Replies (1) of 62
 
HS - Were your puts in or out of the money? Check out what happened to semi-deep & deep in the money puts and puts expiring beyond October:

cboe.pcquote.com

Those were up. The OEX lost 2.42 (.5%) pts today even though the Dow lost 63 (.8%) (the divergence can be traced to EK and GE which are represented in different proportions in the 2 indices). If your puts were near or out of the money, you could only expect maybe 1/3 - 2/3 of the movement of the OEX i.e. .8 to 1.6 points. There appears to be about $6 worth of premium in near the money puts which is about 1.75 less than yesterday. This 1.75 stripping was greater than the .8-1.6 gain. Expect similar results for the rest of the week if the OEX remains in the relatively narrow range it was in today. Well, relative to the last 2 months at least.

Suggestions? Your idea of selling calls to be on the 'right' side of premium stripping is a good one. If that's not viable, then when buying, if you anticipate holding into expiration week, consider deeper in the money and/or further out in time.

One other note. The past few weeks, the OEX has not been a very good proxy for the DOW. If its the DOW you want to track, you may want to consider DIA-monds or the DJX options. I find it useful to keep a printout of the indices' components (see cboe.com )and the weightings of each component. Then if you know of specific stocks that are going to move, you can perhaps identify a better index to trade.
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