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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: niceguy767 who wrote (107937)	4/26/2000 10:13:00 AM
From: that_crazy_doug	Read Replies (1) \| Respond to of 1574267

<< Options pricing is based upon the Black Scholes model. About 15 years ago I obtained a copy of the formula and worked with it for about a year on my Atari 1040ST...Like you have outlined, there are several determinants in the formula, so you plugged in different variables such as volatility, days to expiry etc...It was certainly a worthwhile exercise working with the model as it provided insight as to how options pricing is determined...I would suspect that the Black Scholes model could be found on the web! >> Well my program really isn't about option pricing, per se, you can just use it to quickly find out at what price some options become more valuable than others. (Or I should say, I'm not interested in trying to find the fair price or best price like the Black Scholes would be, I'm just interested in finding what price I have to hit for option A to be worth more than B). As for my AMD strategy, so far I'm mostly using a strategy of buying the farthest out of the money options that are 6 months away that I can.

To: niceguy767 who wrote (107937)	4/26/2000 11:09:00 AM
From: Dinesh	Read Replies (3) \| Respond to of 1574267

niceguy: Black Scholes, if memory serves, was based on the European style of options. It is a reasonably good approximation since few exercize midterm, but does not fully compute the risk (or, benefit). Regards Dinesh

To: niceguy767 who wrote (107937)	4/26/2000 1:49:00 PM
From: Joe NYC	Read Replies (1) \| Respond to of 1574267

niceguy, The market is pricing the options. Whatever method the market makers use to set their bid / ask is somewhat irrelevant. You may try to look for "good deals" if you load all the options, calculate the volatility implied in those prices, than you can recalculate the prices based on the implied volatility and see if any of the options are out of the line. I don't think such a thing is going to work for a retail investor, because the market maker will surely snatch any options that are out of line before a retail investor can react. Joe