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Gold/Mining/Energy : Silver prices
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To: ForYourEyesOnly who wrote (1656)2/5/1999 1:33:00 PM
From: Ray Hughes  Read Replies (2) of 8010
 
THC:

Trading options is a risk business so pro traders don't buy relatively riskless near-the-money options. Furthermore, as the underlying asset moves up, and once-out-of-the-money options get close to in-the-money, the pros roll out to the higher strike. Further, using the strategy of leveraging up using profits they will buy a larger position until a momentum slowdown occurs.

This means the pro buys a larger number of options on the roll-up. Selling to remove profits from the near-the-money options to buy the higher strike depresses the near-the-money. Buying of the higher strike option accelerates so they show larger percentage gains.

MetaStock (Equis) contains a variant of the Black and Scholes model for pricing options. Having this is a key to devising options strategies and knowing when options have become over-priced such that pros will be selling. Send your fax # to me (604) 681-1337) and I'll send you the reference material on Equis.

RH
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