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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Bilow who wrote (9208)	11/5/1997 8:54:00 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 94695

Carl, the problem with option is that they are not priced based on thier "synthetic valuation" but based on market players expectations with the theoretical valuation as a giude. Further more ususaly in stock option the markt maker knows wen you place the order even if it is a small 10 contract order and usually moves the Bid/Ask in his favor. I belive that very active options may not carry this bias, but I still view option trading as gambling against the Casino. In many ways NASDQ stocks are the same. Happy Trading Haim

To: Bilow who wrote (9208)	11/6/1997 1:06:00 AM
From: kas1	Read Replies (1) \| Respond to of 94695

carl, a much easier (for me, anyway) explanation is that any index is already "diversified" for you. assuming no covariance among its constituents (bad assumption, but close enough to be workable), any movements in stock i should be cancelled out by movements in stocks i+1, i+2, etc.

To: Bilow who wrote (9208)	11/6/1997 8:29:00 AM
From: Defrocked	Respond to of 94695

What a post Carl. Your absolutely right.

To: Bilow who wrote (9208)	11/6/1997 1:09:00 PM
From: Arik T.G.	Read Replies (1) \| Respond to of 94695

Carl, Regarding index options: In real life it's a little bit different- After the 500 points drop investors (weather institutional or private) learned the power of OOM index puts. Even after vix regained some consciousness returning from the stratosphere, deep OOM OEX puts still trade around 40% i.v. However, individual stocks' deep OOM puts do not have that much skew and many OEX components's deep OOM puts trade with i.v. under 40%. IMO that's sort of a market failure, and suggests investors are not using their brains as much as they use their emotions. ATG