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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: ajtj99 who wrote (43694)	5/31/2001 1:46:43 AM
From: Londo	Read Replies (1) \| Respond to of 56535

re: options and KKD Look at KKD (Krispy Kreme). It dropped $4.85 today to 70.75, and the 70's only went up a buck to $5.00. People were paying $4.00 to sell this stock at 70 when it was over $75.00! The reason why this happens is that the implied volatility for KKD changes rapidly as trading progresses - i.e. the specialists while KKD was trading at 75 bucks jacked up the quotes (i.e. increased the implied volatility) to roughly 110%, and when KKD dropped down to 70.75 on the close, implied volatility declined to roughly 95%.. This is how obviously they make mega $$$ trading options - they don't really give a crap where the stock goes, you just have to set the right volatility parameters, and the effective spread is even bigger than the typical 40 cents you see posted on the quotes.

To: ajtj99 who wrote (43694)	5/31/2001 9:32:03 AM
From: furrfu	Read Replies (1) \| Respond to of 56535

ajtj, Thanks for the input. BIG correction, I was looking at JNPR35s, not 42s (Posting from home, working notes at the office, brain cramp). By my calcs the price needs to drop ~13% in the next two days to achieve a return approaching 100%. Given that it has dropped 11% and 13+% in the last two trading days and that the next minor support is 20% below yesterday's close, it looked interesting. Having said all that, Your commentary is the reason I asked the question. Thanks again, Doug