Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: margin_man who wrote (596)	1/24/1998 11:17:00 AM
From: Thomas Stewart	Respond to of 2241

Will do. Thanks, Patriot!

To: margin_man who wrote (596)	1/24/1998 12:37:00 PM
From: Shawn M. Downey	Read Replies (1) \| Respond to of 2241

re: dailystocks.com Its a good site. I have a question though. After plugging in some numbers, it became clear that the volitility calculated was not consistently the same. The "in the money" calls came out with a higher volitility and the further from the money, the lower the volitility (for the same experation). Is this what I should expect or is this a result of inefficiencies in the market? I thought volitility would be constant based on the underlying stock regardless of the strike and experation data (at a given time). For discussion purposes I have a few examples using Gateway 2000 (GTW) currently trading at 37.125. C SEP98 30 Bid 10.5 Volitility = 59.375 C SEP98 35 Bid 7.375 Volitility = 54.296 C SEP98 40 Bid 5 Volitility = 51.5625

To: margin_man who wrote (596)	1/25/1998 12:25:00 PM
From: Thomas Stewart	Read Replies (3) \| Respond to of 2241

Another question. The rate of change in price of an option is expected to vary throughout the life of the instrument, no? So that the option, say an out-of-the-money LEAP call, will loose less of its value proportionately in the first month than in the last month (assuming that the value of the underlying security is steady.) (I guess what I am asking is related only to the time-value portion of the price.) Is there an optimal time to sell, say a leap, to replace it with a contract that has a later expiration date--even paying a premium for that later expiration date--to avoid that accelerating loss of value that occurs as a contract nears expiration? I realize that the question may be poorly worded. Thanks for trying to wade through it.