Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: tuck who wrote (11258)	7/20/1999 2:09:00 PM
From: David Wright	Read Replies (1) \| Respond to of 14162

Tuck, I think the real problem is that the MMs don't price the way you and I would..i.e., in our favor :), or in accordance with the model, on these low liquidity options. The real key on all of them is implied volatility, which is entirely market driven. If you don't have a market, then nothing drives them to "fair market" pricing. It's a circular thing, and about all you can do is sit in the middle, and stick your foot out to trip the price you want. I do agree that we play a different game with the one month out stuff. However, you will find that nearer term option prices do move more in lockstep with stock prices, than the ones further out. I think McMillan talks about this in his section dealing with calls and puts. The main thing that Herm buys with longer term options is safety. If you go out four months, odds are pretty good a stock/option combination is going to cycle the way you want at least once or twice. However, that approach gives up higher ROI's/per month, and the effect of compounding. Same old risk vs profit equation, and I still don't really know the right balance. I just like the trading action better with the short term ones. Dave