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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe -- Ignore unavailable to you. Want to Upgrade?

To: Dan Duchardt who wrote (36)	8/14/2001 8:11:05 AM
From: edamo	Respond to of 1064

dan...."Volatility" I believe there is a site "ivolatility.com", which enables scanning of current volatility....I have not used it recently, but it was recommended a while back by an individual that i hold in high regards for her analytical ability. The only caveat about using a scanner, is that you are setting a position on a pure mechanical basis...I prefer to follow a group of stocks that have historically above average volatility, are liquid in both the common and the option, and gain as much knowledge of the real world business of the company....it is the real world knowledge that allows you to see whether a rapid change in implied volatility has any merit...much like your FDA example... By limiting the issues you follow, you can take an almost Taoist approach to establishing the position by allowing it to come to you, instead of seeking opportunity....opportunity offered is more fruitful then opportunity sought....the key is to take advantage of it...maybe an esoteric approach, but i have found over thirty years, especially in options, even an every other year presented opportunity can more then satisfy your returns....hit the long ball to put the icing on the cake, but pepper the field with one baggers during the game....but you don't have to play every day...without a day off, your mind can lack clarity...and you swing at pitches out of the strike zone... another example of capturing the volatility would be dell in march 99, right around its last split, and when the first ever news of the demise of the pc was confirmed by the ceo of ibm.... dell was trading off presplit high of around 110...post split the stock on downgrades dropped rapidly from about 55 to the 46 level...the 0055 put swelled to a 26 premium or an adjusted cost basis if assigned of 29...about a 48% prem to the strike....the common continued down for about two months to the 34 range....the option however flat lined and the prem actually reduced to 22 as time erosion began... when the stock again rallied in december 99 the position was closed at 8....18 point profit on 100 contracts held for eight months....or about a fifty percent return against cash... The opposite holds true for the covered call writer...no different then the put seller, just set at the other extreme...covered call writers should grasp this concept to maximize returns...at times you can write a leap, capture a premium on an otm strike, and sit back and watch the volatility normalize, the time erode, while you lay on the beach....better to tan by old sol, then from the glow of the computer screen...makes for a fuller life....and mid section, as in "la dolce vita"...! ed a