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

To: Poet who wrote (5981)	4/4/2000 7:28:00 PM
From: Tim O.	Read Replies (1) \| Respond to of 8096

Poet, thanks for your response. this is a good thread. interesting about the option price vs. theta correlation. i need to study delta, theta more. i would think though that 15-20% ITM options would have a smaller time premium vs. intrinsic value. so given a small change on the stock price, time decay would have a smaller effect on the ITM option price (compared to OTM). for fast action, like your BRCM puts, the delta on ITM was certainly to your advantage. it's vastly more profitable to write options on the front month, as that's the month with the highest theta. sounds good. what do you mean by front month? appreciate the discourse.

To: Poet who wrote (5981)	4/5/2000
From: PAL	Respond to of 8096

Poet: People have the tendency of counting the chicken before it hatches. For example, someone would sell way OTM puts with expiration date 6 months away (e.g. JDSU Sep 105 puts), thinking no way that JDSU would be selling below 105 by Sep. The juicy premium has been counted/spent as if it is theirs. Granted that more likely JDSU will be > 105 by Sep. But they forget that the months prior, JDSU can dip significantly, witness today's low was 82. Two weeks ago they could have close the position when the premium was only half what they received and collect the profit. Your short put on the front month is a good strategy although the extrinsic value is minimal, but you make it in volume as you can do it over and over again. Just like selling goods with small margin but you make it on volume. Thanks for sharing. You are a sweetheart. Best regards Paul