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Technology Stocks : All About Sun Microsystems
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To: Ben Antanaitis who wrote (14400)2/20/1999 10:27:00 PM
From: E_K_S  Read Replies (1) of 64865
 
Hi Ben - Have you thought about a 2nd derivation on your option analysis? You probably have enough data now with all the stocks you follow to begin to tweak your analysis. For example, I have noticed that SUNW option premiums have expanded significantly looking forward.

Sunw is not the only stock where option premiums have expanded so perhaps this is due to the overall market PE valuation, low inflation expectations and specific stock expectations...all looking into the future.

You will notice that PUT premiums have increased but not as much as the calls.

One could argue that the market is very efficient in pricing stock and options (ie. efficient market theory) and these "new" future events are built into todays prices. It appears to be a bit different now with global economies very much connected, continued low interest rates and many more 401K, IRA and Roth long term investors. In fact more index fund type investments (look at that new sector spyder XLK, Technology Index).

Have you looked at any other micro or macro variables to include in your analysis? What about the impact of LEAP options on the Max-Pain?
...Or two or three month out-of-the-money option activity and their impact on on the Max-Pain for the current month?

I know from my option trading over the last several years, these trading derivatives are key in (1) hedging my over all portfolio (2) generating income (in lieu of standard dividend income) and (3) now make up over 60% of my overall trades. I consider myself a long term investor and buy stocks that I hold 2-3 years but I do write a lot of covered calls.

Comments?

EKS
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