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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (3883)	3/2/1998 11:25:00 PM
From: hasbeen101	Read Replies (1) \| Respond to of 18691

Interesting that you raise this point about an academic writing index puts. I'm sure you know the options text by Cox & Rubenstein. I attended several lectures by Prof Rubenstein (who is from UC Berkeley) a few months ago. His evidence shows that index put options have been systematically too expensive since the October 87 crash. In other words, scared investors are prepared to pay more than fair value for the insurance offered by index put options. So the strategy of writing index puts can't go wrong? Well as you know it obviously can, since one catastrophic event can blow you out of the game. This would be one reason why prudent individual investors had not arbitraged away this inefficiency (although I can't really understand why institutions didn't). Successful investing sure ain't easy.