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Strategies & Market Trends : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: KFE who wrote (1710)	9/27/2000 8:50:22 PM
From: Vol	Respond to of 2317

I think by buying deep ITM options you try to get a higher delta, which will increase (or decrease if a put) as SPX goes down. The discount is helpful too, b/c as opposed to American style options, the price of the option can actual increase as time passes (assuming the SPX price and volatility doesn't change). Let's revisit the example. 9/15/00 SPX 1465 buy Dec01 1600 put for 140 sell Oct 1475 put for 30 1/2 Cost = 109.5 9/27/00 SPX 1426 (-2.7%) Dec01 1600 put 160 bid Oct 1475 put 50 ask Value = 110 Pretty much a wash with nearly 3% drop in less than 2 weeks. If this was expiration, the strategy would be to buy back the Oct 1475 and sell Nov 1450-1475. Vol