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

To: Esteban who wrote (634)1/30/1998 1:49:00 PM
From: ----------  Read Replies (1) | Respond to of 2241
 
Esteban:

Your analysis is faultless, assuming you hold them to expiration.

However, you must remember :::intrinsic value:::. The stock is at
14 1/2. The 17 1/2 put has intrinsic value of 3. If it was
priced less than that, I'd arbitrage the specialist right into chapter
7 bankruptcy. If the 17 1/2 was at $2 I would: Buy 10,000 OXHP at 14 1/2, buy 100 puts at $2 and exercise immediately. In essence I'm
buying the stock for a total of 16 1/2 & putting it to the guy at 17 1/2. I could use a fast no risk $10,000.00 .

Implied volatility comes in a distant second to actually covering your butt when you are an options specialist. <g>

Doug



To: Esteban who wrote (634)1/30/1998 9:22:00 PM
From: margin_man  Respond to of 2241
 
<<<If one sold these two puts and at expiration the stock price is unchanged from today, the MAR 15 nets 1
1/8: 14 1/2 - 15 + 1 5/8 and the MAR 17.5 nets 3/8: 14 1/2 - 17.5 + 3 3/8>>>

That's why when one wants to sell options, it's better not to
sell too much deep in the money options. Do the opposite when one
wants to buy the options. IMO.

Patriot


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