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Strategies & Market Trends : Value Investing

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To: peter michaelson who wrote (5628)	1/2/1999 5:01:00 PM
From: Allen Furlan	Read Replies (2) of 78735

CBOE showed stock at 321 1/4 and yzzmf(Jan 330 put) at 32 1/8 for last on 12/31. Assuming these are approximately correct the Jan 330 put has 8 3/4 intrinsic value(330-321 1/4) and 23 3/8 time value(32 1/8-8 3/4) This huge time value for a ten day option is quite appropriate because of the extreme stock volatility. If the stock rises above 330 your put expires. You are protected above 330 by the time value, ie 23 3/8, so your break even point is crossed at 353 1/8. Remember your total sales proceeds were 321 1/4 plus 32 1/8 or 353 3/8. You lose above that price, but holding during the daily volatility is a lot easier.(at least for me). If your analysis is correct and stock does fall(or stays below 330) your profits are limited to time value, ie you are put the stock to buy at 330 but your initial proceeds were 353 3/8.

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