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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: rkral who wrote (936)	1/11/2000 1:15:00 AM
From: freeus	Read Replies (1) \| Respond to of 8096

I think your summary of the AOL/Twx options is correct. That's how it works with odd splits (3/2) of options. To do italics and bold you just have to: for italics put < then i then > at the beginning of what you want italicized then to stop put < then / then i then >. For bold you do the same thing but substitute b for i. Freeus

To: rkral who wrote (936)	1/11/2000 7:19:00 AM
From: Jill	Respond to of 8096

deleted

To: rkral who wrote (936)	1/11/2000 8:54:00 AM
From: Eylon	Read Replies (3) \| Respond to of 8096

Thank you Ron for your answer, that make sense the same as 3/2 split. So after we clear that here is the ultimate option/arbitrage play. This one take advantage of the different in price and volatility between AOL and TWX. Unfortunately for me Fido don't allow me to write naked calls so I can't do it. Step one: Sell as many AOL naked leaps call as possible. Let say 120 contracts of 2001 60 at $26. Total income $312,000. step two: Buy 2/3 of the number of contracts of TWX for 1.5 time the strike. Let say 80 contracts of 2001 90 at $23. Total expense $184,000. If AOL and TWX become one company you have exactly the same number of call for the same price, you can close your position no matter what the stock price is at this time. Net profit is 128,000!! this number depends only on the number of naked calls you can sell the net profit is about $1000 for naked AOL calls. The only risk is that the deal may not go through. In that case You are in a big mess. Since the deal must go through for the play to work, leaps are better because leaps give you more time. Notice that the difference between the two options is so large because TWX and AOL prices are not yet adjusted to each other, and AOL volatility is higher than TWX volatility. What is this thread thought of it? Eylon