To: rkral who wrote (1400 ) 1/20/2000 3:42:00 PM From: RoseCampion Read Replies (1) | Respond to
Your reply proves that one can have an excellent understanding of options without a need to be skilled at the math involved. This is meant to be a compliment .. though somehow it doesn't sound like one. Let me clarify the above. The volatilities for different time periods are related by the square root of the ratio of the time periods involved, as stated in McMillan OSI. Message 12605898 The interesting result of this mathematical exercise is that the expected profit from my covered call position in AOL, on the day it was placed, was about ZERO....Does a number in this area make any sense to anyone? initial profit expectation on any play where the option is currently priced at its theoretically correct level going to be zero? After all, someone is buying that covered call you're selling expecting to make a profit as well - if the option is correctly priced for the stock's current price and volatility, both of your theoretical net profit expectations must start at zero (even though you certainly must have different expectations for the future stock price).
