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To: IceShark who wrote (2087)12/13/1997 11:48:00 AM
From: John H.  Respond to of 2563
 
J~

It is a kind of a whacky shorthand, isn't it. Still, let's examine the bull put spread parameters, using a bit more conservative spread:

Cpq currently at 56 5/16

Sell jan 85 puts at 28 1/2

Buy jan 65 puts at 10 3/8

net is 18 1/8, minus costs.

If the stock goes down 10 pts (or even 50 pts) and you get assigned, you turn around and assign it at 65, for a difference of 20 - 18 1/8 or a net of -1 7/8.

If it goes up, then you step out when it feels right, or wait for the position to turn to dust.

j



To: IceShark who wrote (2087)12/13/1997 12:06:00 PM
From: Janice Shell  Read Replies (1) | Respond to of 2563
 
J~

My immediate problem was trying to figure out ohw much of the option value was associated with time...

You can figure out the theta, more or less, at

cboe.com

It works pretty well, except I find taht near expiry premiums tend to retain more value than they "ought to"--you can pay (or receive) surprising amounts even on The Day, up to the last hour or so and even beyond.

J


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