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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: IndioBlues who wrote (55936)	12/3/1999 8:35:00 AM
From: RWS	Read Replies (1) \| Respond to of 95453

Hello. If you look at fast.quote.com the market doesn't think BR is going anywhere fast soon as BR's volatility is 41.8. So, all the calls on BR are relatively cheap compared to e.g. FLC. If you think the market is right then in the money calls are a best conservative bet. If you agree with the thread sentiment that prices of energy stocks will see increased volatility in the coming weeks, then out of the money calls will generate a higher return if expectations of higher volatility are met. The delta, or rate of change of the option price relative to stock price, for the BR Jan32.5's is .60 and for the Jan35s is .41 and for the Jan37.5's is .25. The maximum delta is 1.0. If you look at the gamma, which is the rate of change of the delta, you see that is about the same for all three strikes. So the delta on each strike will increase at about the same rate for each dollar increase in price of BR. And as BR's price approaches the option strike price gamma will exponentially decrease. The out of money calls have a lot more room to appreciate than the in the money calls. For my money, I would risk an out of the money triple or quintuple than an in the money double, on the belief that energy stocks will see a marked change in volatility soon. Best of luck. RWS