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To: Valueman who wrote (1677)1/10/1998 2:33:00 PM
From: ccryder  Read Replies (1) | Respond to of 10852
 
<<The call options are not backed by stock>>
From what I understand they used to be but the market makers are no longer required to do that. I supposed there is nothing that would prevent them from doing so just like the public can write covered calls as a hedge.

It looks to me that the calls are initially priced, as a minimum, at the current stock price plus interest, plus a fixed percentage. They may be priced higher depending on the stock volatility.


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