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

To: Robespierre who wrote (1509)	4/13/2000 7:01:00 AM
From: Porter Davis	Read Replies (1) \| Respond to of 1599

>>you had some funny quotes on BCE options today (Wed) The 'funniest' quote of all, of course, was that of BCE itself, down some $15. I can't say I disagree with all your observations, but I think in some regards you're comparing apples and oranges. You suggest that US markets are much tighter on BCE then we are. In my experience that is not the case, and it is also not supported by the option arbitrage players who tell me they can't get any trades off on BCE in the States and tell me our markets are much better. Are you also taking the CDN$ into account? A .50c US market is more like a $C .75c spread. I envy your commission rates, but again I'm sure it's $US you're paying. I will admit that currently we have no control over the spread that we call in Montreal; they're determined automatically by the "Quoter" system, but when the underlying has a spread of .25c our options have a maximum spread of .25c as well. I have never seen a composite US quote of less than 3/16ths. Another quirk of the Quoter that I forgot about the other day is that indeed it does generate zero bids for essentially worthless options (although I don't consider any option worthless!). We can't force it to post at least a .01C bid, but I hope we can change that. We also can't "book" a market, which I often did, that is, if say an offer came in that was a touch above what I was willing to pay, I would book a bid above my 'normal' bid to try to entice a trade. (It's funny that people accuse us of 'running away' from orders. If I don't trade, I don't eat!) The ISE does present an opportunity in theory. In fact, I will be taking a hard look at it as a possibility for me. I do believe it a chimera to believe that it will hit the ground running with instant liquidity and depth, but it will bear watching. I have a quality portfolio here, and it will take a lot for me to give it up. We have had some transition pains in our move here, but to their credit the ME rolled their sleeves up and fixed the immediate problems that forced us into fast markets every day the first two weeks. There is in my opinion a lot of 'tweaking' still necessary, but we are up and running normally now. I must confess I'm a touch mystified by your strategy, as I take it, of putting on synthetic longs on individual stocks based on the futures market. I rarely if ever see anything like that done by professionals. Program trading plays a significant role in adding volatility, but a stock is going to go where it's going to go regardless. You mentioned the higher IVs in the States. That is indeed true, as there are actually speculative buyers down there! I will suggest that covered writers have been getting slaughtered in this market. Remember that one-up covered writing is exactly the same as selling puts naked. BCE vols went up two points yesterday as closing buyers and bottom-pickers were the only players. No sellers in sight right now. Interesting that since we've moved here, we dropped the vols in ABX by four points (the high-vol ABX bull didn't move here with us), and we still have wall-to-wall sellers. My contrary antennae are twitching. ABX has not responded at all to any uptick in gold so far, but I look for a sneak rally soon. Ballard is Ballard and continues to scare the stuffing out of me. A ten of fifteen dollar range is the norm every day. It's great if you're right, but murderous if you're wrong. IVs back over 100%, and richly deserved. I've temporarily lost whatever 'feel' I've had for INCO, but it doesn't appear to be going anywhere soon. (Feel free to use me as a contrary indicator) Happy trading. Porter