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

To: Oeconomicus who wrote (3949)	3/3/1998 8:50:00 PM
From: tom pope	Read Replies (3) \| Respond to of 18691

I still don't get it. <<demand among investors for long positions probably far exceeds supply, i.e. investors wanting short put positions.<< A short put position is a bullish (long) position. Short a put and buy a call and you have the 100% equivalent of a long stock position. >>In more active options, particularly index options, there is plenty of competitive arb activity and I would bet that you wouldn't find the same overpricing of puts<< The OEX options do indeed show persistent "overpricing" of puts. (By overpricing I mean that MIV increases as you go down the strike curve - i.e., "volatility skewing. ) Puts are theoretically overpriced because longs are buying them for hedging purposes. If they were truly confident about the upward direction of the market they's sell puts to pick up the income. Perhaps I'm missing a link in ur argument.

To: Oeconomicus who wrote (3949)	3/4/1998 10:06:00 AM
From: Bilow	Respond to of 18691

About those over-priced puts. Yeah I was amazed that they had got as far out of balance that it was possible to arbitrate away a little cash with AMZN options, as I illustrated. But it isn't really that much. By the way, I was considering index puts this morning. Even though they are a little more expensive than the corresponding calls, the time premiums on everything is so cheap right now, and the market is so high that they seem attractive. One reason why the puts are more expensive now is that Neiderhoffer isn't around anymore to sell them naked. :) Instead, I bought ADEX this morning on their incomprehensible (to me) decline. Probably they will have a downgrade later today. -- Carl