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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: sergio who wrote (34522)	2/1/1998 2:50:00 PM
From: Patrick Slevin	Read Replies (1) \| Respond to of 58727

Option Volatility I'm sure, novice though you may be, you are at least as versed on it as I. I trade SnPs mostly so I have little need for this stuff. I would guess they blow town once the VOL settles down. As far as spreads are concerned, my nephew Jack runs a desk in London. When I was on the floor with him for a time last year he told me their bread and butter was to parlay these positions into butterfly spreads. I would presume that this is the rule. Butterflys, as I have always been told, are the most consistantly profitable parlay in option trading. Larry McMillan preaches that the market can be biased by arbs in expiry week depending on where the Open Interest is, but that's just one week of the month. His implication is that the smart money does establish a position and hangs in with it. Obviously he knows more about it than I do and so my opinion may be worth the price of yesterday's newspaper. Higher VOL would certainly lead to higher pricing of both puts and calls regardless of motion in the underlying index or stock. "Mispricing" is difficult for people like you or I to determine. A book gathering dust near me here is called "Option Volatility and Pricing" by Natenburg. It was recommended to me by a CBOE MM and is supposed to be definitive as far as understanding the way options are priced. So if you have the time and inclination you might want to pick it up for some insight. I have to go to Florida next week and will try to catch up with the reading on the plane. If I come across anything pertinant I'll post it.