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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (94346)	2/3/2002 1:51:56 PM
From: Tommaso	Read Replies (1) \| Respond to of 132070

Not a call: a put. Not a stock. An index. And it's a European-style option. It's not theoretical. Look at this table: quote.cboe.com Look at the last put option in the right hand column, the 140 (i.e. 14,000-level) put on the Dow for December, 2003. Notice the last sale was 34.50 (i.e. $3,450) and the bid/ask makes it worth about 36.50. With the Dow currently at about 9900, the 140 put would have an intrinsic value of $4,100 if it could be exercised immediately--but it cannot be exercised until December, 2003. So at the end of trading on Friday, one could probably have bought the put for $450 less than its ultimate intrinsic value. To realize that value, you would have to hold it about 20 months. Of course you can sell it to someone else any time. The DJX index calls have a horrendous premium. I wouldn't touch them. Unless we get so far down in a bear market that people are so pessimistic that they are selling them for less than their intrinsic value. I think these discounts on the DJX puts are in themselves a pretty good measure of just how inflated stock market values and hopes still are.