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

To: hobo who wrote (9316)	1/27/2001 10:28:40 PM
From: hobo	Respond to of 10876

economist.com CURRENCY PROJECTIONS Jan 25th 2001 From The Economist print edition The euro’s recent rally against the dollar should continue over the next three months, according to quarterly estimates by J.P. Morgan Chase. In a year’s time, however, the single currency is expected to be worth roughly the same as it is now. The yen is predicted to follow the opposite course, first falling and then rallying, to an eventual rate of 113 to the dollar in January 2002. The forecasts imply that sterling will depreciate by roughly the same amount against the euro and the dollar over the next 12 months. Of the 16 currencies in the chart, only the Mexican peso and the South African rand are expected both to be weaker in three months’ time and to be weaker still in a year. Only the Australian and Canadian dollars are forecast to rise and rise again. The Australian dollar’s 11% rise against the greenback is the largest predicted move.

To: hobo who wrote (9316)	1/31/2001 9:43:03 PM
From: dli	Read Replies (2) \| Respond to of 10876

unfortunately, at this point i do not have access to the software that would allow me to seek and select the best pricing available in all 4 markets. Check out Interactive Brokers. For options there's nothing better around. They give you direct access to all five options exchanges and unlike Cybercorp it's not just an add on to their Nasdaq trading. At $1.95 per contract with no base charge they're probably a lot cheaper than Schwab too. i have held a theory that as a seller the odds are more than slightly in my favor due to the volatile market we have seen and the time decay factor... what also helps it has been the "proper" selection of strike prices. (i. e. resistance points, level of premium received, etc). The problem with naked selling without any hedge is that it has very unfavorable risk/reward characteristics over the long term. Average wins tend to be relatively small but a single hit will often wipe out a whole string of them. And then there's always those once in a million years events that happen much more frequently than people think since the financial markets don't fit a standard distribution but instead exhibit much more pronounced tails. however the real problem is the fact that the exchanges are not linked. they say "its coming" i ask when ? they say don't know. Why do you think that's a problem? After all you are free to send your order to the exchange quoting the best price. how the hell do you calculate (accurately I mean), something as "airy" as Volatility...? they tell me that the chaos theory can do that stuff blah blah blah... There's two kinds of volatility in conjunction with options, historical volatility and implied volatility. Historical volatility is easily computed as the annualized standard deviation of daily returns of the underlying. It serves as a starting point for the determination of implied volatility which represents the market's (not just the MM's) consensus of what the underlying's volatility is likely to be in the future over the course of the contract's lifetime. If people think that the volatility estimate as expressed by implied volatility is too low they will consider the option underpriced and start buying it since it represents an arbitrage opportunity thus driving up the price and thereby adjusting implied volatility to a higher level. Volatility is an "opinion... " or rather a standard deviation of a consensus.. or something to that effect. well, that's good, but if some pedestrian market maker does not give you the pricing that your space age option pricing formula gives you ... your choice is... not trade or trade at what the market says... ...and take advantage of the over- or underpricing. Dave