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

To: Poet who wrote (6065)	4/5/2000 10:11:00 PM
From: the options strategist	Read Replies (1) \| Respond to of 8096

Hi Poet, for anyone interested. Delta: is the amount by which an option's price will change for a corresponding one pt. change in price by the underlying entity. For a call option example, the delta is the amount by which the call will increase or decrease in price if the underlying stock moves by 1 pt. Eaample: If ABC were 50 and ABC july 40 call were 10 1/8, the call would change in price by nearly 1 pt if ABC moved by 1 pt. up or down. A deep out of money call has a delta of nearly zero. If ABC were 30 the july 40 call might sell for 1/4 pt. If ABC moved by one pt, the call prem would change very little. If the underlying is an at the money strike, the deltA is generally between 1/2 and 5/8 of a pt. The delta mentioned abov may be somewhat different for very long term calls. This is why many traders buy deep in the money so the option can move like the stock, up or down. Been out of town but still want to get with you. Will PM you when i get settled. jj

To: Poet who wrote (6065)	4/5/2000 10:42:00 PM
From: DM	Respond to of 8096

Delta, Tells you how much an option will move based on movements in the underlining. a delta of .50 means that for every dollar movement in the stock the option will move 50 cents. AS the option becomes in the money the delta goes higher, until the option moves one for one with the stock (or as close to one for one as you can get) Hope this helps. DM

To: Poet who wrote (6065)	4/5/2000 11:45:00 PM
From: PAL	Read Replies (4) \| Respond to of 8096

Hi Poet: What I want to show is how to get out of a margin bind if you are selling put. As you know the margin requirements for selling puts are as follows: The greater of a) 25% of the underlying stock plus premium minus OTM amount b) 10% of the underlying stock plus premium When the stock is oversold you don't want to buy put options. The same is true that you don't want to close your short put in an oversold condition. But sometimes in a fickle time of the market, you might have to close your position to satisfy a margin call. On the other hand, you know the stock is going to rebound. You want to keep a shortput position. What do you do? I am giving an example to illustrate how to reduce the margin requirements (selling CC in not recommended because the stock is oversold): Let just say you are short 10 April 110/JDSU puts. Each put is selling at $ 9/share. JDSU closed at 110. Margin requirement 25% of 110 (closing price) + $ 9 (premium) - zero OTM = $ 36,500 ____________________________________________________________ You are in a margin bind. You can close the position by buying back those ten contracts for $ 9,000, and immediately sell 10 June 90 JDSU puts which cost $ 9/share as well. Use the $ 9,000 proceeds from June options to buy back the April option. Your margin requirement is now the greater of a) 25% of 110 = 27.5 + 9 - OTM (110 closing price - 90) = $ 16.50 b) 10% of 110 + 9 premium = $ 20 Thus the new margin requirement is $ 20,000 vs the previous $ 36,500. You still have 10 contracts short put on JDSU and now the strike price is $ 90 vs the previous $ 110. The expiry date has been moved to June allowing us to ride out this market turbulence. This roll out and down is better than covering the short put. Maybe the above approach has been discussed in your Option Seminar and if that is the case, you certainly can explain it better than me. Best regards Paul