Ask Michael Burke Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Denice who wrote (38706)	12/8/1998 10:55:00 PM
From: Skeeter Bug	Read Replies (1) of 132070

denice, that's about it in a nutshell. i'd add that expiration is always the third friday of the month. mike is betting that csco is below $70 on or before the third friday in april. if an option is out of the money (at or above a strike price for a put or at or below a strike price for a call) then what you are buying is 100% time value. intrinsic value is the amount an option is in the money. ex, if csco goes to $65 then mike would have $5 of intrinsic value. if the put was trading for $7 then he'd have $5 intrinsic and $2 time value. if csco were to fall to $70 tomorrow then mike may even sell and turn a very nice profit very quickly. so, the put never had any intrinsic value and a high % return can still be made. time value is perception. if people perceive future volatility then time premies go up. if they don't then they are cheaper. if you hold until expiration then you only make intrinsic value as all time value has eroded. if there is no intrinsic value then what you have left and $0.50 won't buy you a starbucks coffee ;-) my only caveat is that a risk reduction strategy is NECESSARY and mike's is very good if you can afford it. otherwise, broke might become a state of being ;-) good luck.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next