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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Electric who wrote (26981)	10/26/1997 11:36:00 PM
From: kajtek	Respond to of 58727

Electric. If I understand corectly the calculator calculates implied volatility and translates it to the option price difference between what it should be to what it is. My question is what volatilty is used for the base to compare. TXN was very volatile recently and this is why option premiums are high. I find that to predict volatility is even more difficult then the price movement. Volatility almost always drops the day after earnings reported close to predicted earnings. But how to predict earnings? If anybody is interested I have Excel97 spreadsheet for calculating option price. The graph shows how the option price will change with time and with stock price change (by calculating delta and theta) on assumption that volatility is the same. One can change volatilty and produce different graphs for each volatilty to see the difference. I use this charts to see when to exit.(It does not mean that I exit at the right time because it still depends on how I predict the future) Because it shows time depreciation I can for example see from the graph that if I waited another week my stock would have go more than $3 up before I will be better off then today. Then if I think that this is unlikely then I exit now and invest somwhere else. I recently used it for my IOM nov 30c. When IOM was approaching 30 I looked at the chart and saw that unless IOM moves to 31 within one to two days I will be better off to sell it right away instead of waiting few days to see IOM at $31.