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Strategies & Market Trends : Canadian Options

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To: kajtek who wrote (29)	1/23/1997 7:13:00 AM
From: Porter Davis	of 1598

Andrzej: Yes, our program uses a variation of Black and Scholes. We enter the variables, the most important of which is volatility. I often feel that having an idea of where volatility is going is more important than which way the stock is going. As to whether you get filled on a bid between the market--depends on several things. Does the stock drop far enough, is it an active series, etc. One of the most common mistakes I see investors make is having the right idea but missing the move by trying to save five or ten cents by middling the market and not getting the trade up. Oh, and Barron...you asked, I answered. No need for an attitude. I add a disclaimer to keep my butt clean with the OSC. As I explained, the gap that option players dread/ long for is an overnight or intra-day large gap in the price of the underlying, like IBM yesterday. The bid/ask spread is a function of the auction process. If I think an option is worth $2.00, my market my be $1.90 - $2.05. Someone else might bid $1.95. If you go to the store, you don't have the option (pardon me) to bid on bananas...the owner sets the price. An auction is the fairest and most visible way to establish the price of anything. "Mind the gap!" Porter

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