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

To: Madpinto who wrote (637)	1/30/1998 6:44:00 PM
From: ----------	Read Replies (1) \| Respond to of 2241

Thank you for bailing me out. My explanation was poor. Yours was accurate, concise & well written, imo. Doug

To: Madpinto who wrote (637)	1/31/1998 12:19:00 PM
From: Esteban	Read Replies (1) \| Respond to of 2241

Thank you Michael, In addition, as the seller, you cannot make more on the put than the price you sell the option. You have the potential to make about twice as much on the 3/17.5 put than on the 3/15 put. Selling another 3/15 put to equalize the maximum possible return increases your risk significantly. I understand this explanation of yours. I'm not that clear about the put buyer's perspective and his concept of risk though. Think of it from the perspective of the buyer. The buyer of the 3/17.5 put has all the risk of being short stock up until 17.5. Accordingly, the put buyer would not want to pay very much for protection above that price. After reading and straining my brain cells thinking about this portion of your explanation, am I correct in thinking that the time premium for the further in the money put is less because the risk of loss (size of total premium) is roughly double with the 17.5 than the 15? Esteban