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

To: chris mills who wrote (10514)	4/20/2001 8:35:47 AM
From: John Pitera	Read Replies (1) \| Respond to of 10876

Any type of option strategy like that will give different resulting profit and loss numbers depending on what the stock does. If you write the may 50 call and the may 50 put, which is called a straddle. And collect 4 for the call and 2 for the put, and the stock closes at 50 on the 3rd friday of may that is great you pocket all the premium. but if the stock closes at 70, then you are down 14 for each pair of put and call written. It's very much dependant on what the stock does and also the options implied volatility can surge up and down from say 50% down to 20% and that will make the puts and calls more and less expensive (more expensive when the implied volatility is higher). So there is risk involved, pretty much no matter what you do. Larry Mcmillian has suggested that options investors actually look to buy say a May 50 call and a may 50 put if the implied volatility has trended down to a 3 or 6 month low on a stock option set, as it implies that the stock is coiling up for a large move, either up or down. there is an awful lot to say about options strategies, you might want to get Larry McMillian's book "Options as a strategic Investment" or "Options Strategies" by Courtney Smith. Several other books on the subject are good as well. John John