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

To: alanballow who wrote (4503)10/13/2006 12:13:47 PM
From: Uncle Frank  Respond to of 5205
 
>> Right now the Oct0622.5 puts and calls are 60 cents apart. I feel like the efficient market theorist walking past the $100 bill in the street because the market would have picked it up if it was real. Am I missing something here?

Yes. You're missing the fact that spreads are too complicated for me, and give me a headache whenever I try to figure them out :-/. Maybe one of the others can help.

duf



To: alanballow who wrote (4503)10/13/2006 11:27:47 PM
From: Bridge Player  Respond to of 5205
 
Stocks that are very close to the strike price will often carry time premiums on both puts and calls until just before the close on expiration day. The amount of the premium will vary as a function of the volatility of the underlying and if an earnings announcement is due just before expiration, that premium may be significant, reflecting uncertainty about the direction of a move that may result from a surprise.

All IMO.


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