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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: sargent who wrote (45886)	4/13/2000 12:10:00 AM
From: HairBall	Read Replies (1) \| Respond to of 99985

sargent: A bottom maybe, but not "the". Regards, LG

To: sargent who wrote (45886)	4/13/2000 3:16:00 AM
From: Haim R. Branisteanu	Respond to of 99985

Sargent I tend to agree with you would not short this market at those levels took profits yesterday bit to early. On great indicator is to calculate IV on stock options,mostly call option they are bought by the longs which sold but are still greedy and by the shorts who hedge themself. Puts are bough by those in fear. IV exploded. cboe.com I can tell that premium are almost double. With a week to go IV is around 120% in many stocks, wen historicaly the IV was around 60% For those willing to go long sell in the money puts and sell out of the money calls. At those IV level a $5 to $8 option deflates around 3/8 a day or 3/4 per pair per day and the weekend is coming this will add up to over $2 per pair in fluf evaporating into thin air, even if the stocks moves 2 to 3 points. But there are no free lunches spread widened from 1/8 to 1/2 in active options, and the risk of a sharp move is still there. If volatility shrinks by to 80% (which is still very high), will add another $2 to each option. As an example sell 120 IV, option of $5 put and $6 call for a total of $11 credit by monday time erosion will make the pair $4 and $5 if IV drop the pair can bought back at $3 and $4 or for $7 or less. Holding to expiry it may be $0 to $1 or wath ever BWDIK Haim In my theoretical example