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Politics : Ask Michael Burke
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To: Bill/WA who wrote (44392)1/23/1999 10:13:00 AM
From: Don Lloyd  Read Replies (2) of 132070
 
Bill (Can you, or would you explain what's happening here, cause
I sure can't find it in McMillan's.)

An out of the money option is largely influenced by implied volatility, essentially an expression of the expectation of the possible trading range of the stock between the present and expiration. After the IPO was brought to market, a major portion of the uncertainty in the stock price action was removed, and it would only be expected that the pricing of the options would subsequently reflect the lower expectation of volatility. In addition, you need to look at the prices (especially the time value portion) of the call options over the same period. The value of the call options and the put options are not independent, as an arbitrage can be performed using long or short stock if one option or another becomes priced significantly out of line.

Regards, Don
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