To: Flagrante Delictu who wrote (12658 ) 12/16/1997 3:58:00 PM From: Flagrante Delictu Read Replies (1) | Respond to
Bernie McDermott, I was trying to reply to Howard Barnum on my last post #12658 when the system cut off the top of that post. So as to save the drudgery of rewriting the whole thing, I will put forth here what I wanted to say to Howard & which should have appeared at the beginning of post 12658. Howard had complained about a threatening tone & an innuendo of sexual violence. I thought he was kidding. I tried to figure out where he could possibly found anything that could have lead him to such a conclusion. Sure enough, if one goes to the PCYC thread, one can find exchanges between squetch & me with reference to options trading that a person unfamiliar with the terminolgy as practised in the options industry all over the world, might not know were standard practice in that industry. Specifically, options traders all over the world enter & exit combinations of options which have names such as straddles, strangles & boxes. Those who object that options traders use such terrible words are advised to write to the CBOE, the Amex, the Pacific Coast exchange, the Philadelphia OPtions Exchange, The New York Stock Exchange, The Chicago Board ot Trade, The Chicago Merc, the N.Y. Merc. & other exchanges both here & worldwide to request that they immediately cease & desist from such abhorrent practices & to order their memberships & clientele to immediately cease using such offensive words. But so that Howard would understand what a straddle was & what a strangle was & what a box was, even though he might have already known what they were,& maybe he WAS joking, I started by explaining that a straddle was a combination of a put & a call on an underlying instrument such as Ligand Pharmaceutical common stock, which put & call had the same strike price e.g. $12.50 & the same expiration date e. g. the third Friday in Dec., 1997. A strangle on the other hand was an option combination which included a put at a strike price higher than the underlying was trading for e.g. the Dec15 put and also a call with a strike price below where LGND was trading, such as the $12.50 call. To aquire a $12.50 straddle in LGND one might buy the Dec. 12.5 put whose current price is $1.82 & also buy the Dec. $12.50 call at $1.06 for atotal cost pf $ 2.88. You have thereby locked in or strangled $2.50 out of the market at a minimum & stand a chance to make alot more should LGND close above $15 or below $12.50.
