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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (407)	11/13/1997 2:54:00 AM
From: Aaron Weiss	Respond to of 22640

Greetings Steve, It sounds like the implied volatility was a lot lower a few weeks ago than it is now...Do you mean that the total premium on 10x10 of the Nov 130/140 strangle was $10K? That's an average price of about 5 per option ($500/contract)? Assuming you priced these in early October, that's an IV of about 34% If Ken just sold some (Dec) 100 calls at 6 with the underlying at 87, the IV must be awfully high...in fact, I just calculated it, it's 94%!!! Ken, were the covered calls you wrote on your buy at 87 Decembers? A volatility of 94% is a premium writer's (option seller's) dream! Credit spreads, ratio writes, and shorting wide strangles would be something to consider. If TBR settles into a trading range, the IV (and hence option premiums) would likely collapse enabling the nervous writer to cover at a profit. You're absolutely right about most people not riding a winner out when the underlying is so $^&!# volatile. Buying the option is one thing, but knowing when to sell it is the hardest part of all. With the added torments of time decay and volatility variation, it's much more difficult than closing out an equity position! As for TBR over the short term, I also agree with Steve. HK has bounced +1.28% and the S&P 500 contract on Globex (overnight futures trading system) is up 970. If the markets open with the S&P up 9.70 overnight, that'd suggest we're in for an opening pop of 80 points or so on the Dow. Since the LatAm markets have a beta of around two (probably more for the BOVESPA), that'd suggest an early rally of about 2% could be in the cards for these markets. But things in the Asian and Brazilian financial markets are so unstable at the moment, it's hard to know what happens from here other than continued volatility. As the buddhists say: the only permanent thing in the universe is impermanence (change). Enjoy the Roller Coaster ride everyone!