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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Jon Khymn who wrote (4225)	4/17/2004 2:18:44 PM
From: Dominick	Read Replies (1) \| Respond to of 5205

I don't think there are "overpriced" option because high premium options are considered to have "high volatility". So I assumed all premiums on options are "fairly" priced. Fortunately there are overpriced options. That's what option writers want. To sell high volatility because one of the things they count on is a reversion to the mean. Options are often not fairly priced. The market maker sets the IV and the B/A spread. BTW. Do you take in account the percentage difference of the B/A spread? What if it's 15% to 20%? Your 2$ example would have a $2.30 to $2.40 offer. Volatility could have a significant effect on your buy-back, thereby receiving much less than expected due to b/a kept high because of it. For maximum income, it does make a difference when you write,i.e. writing at an underlying resistance area vs its support. For me, timing of a write is a crucial factor. Now ain't this fun! dom