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

To: Brian Hecht who wrote (907)	6/30/1998 12:18:00 AM
From: Girish Patel	Respond to of 2241

Sorry for the delay in reply. I have not checked SI for a while. Now for some back testing. CHKPF closed today up about 2 1/2,at 337/8. Jan 25 calls (KEQAE) closing 10 7/8 (11 1/2 x 12 1/4); Jan 30 calls (KEQAF) closing 7 7/8 (8 3/4 x 9 1/4). On June 5, closing price for CHKPF was 28 3/5; KEQAF at 5 7/8 and KEQAE at 6 1/8. Now, if you were to sell today, KEQAE (jan 25 calls) will return you a profit of $4 5/8 (actually, $5.37 or 87.7% on a bid price of 11 1/2) and KEQAF (Jan 30 calls) will give you a profit of $2.00 (or 48.9% on a closing bid price of 8 3/4). Not too shabby for a short trade. HOwever, even though the Jan 25 calls initially looked expensive, they gave a much better return on your investment. Call delta and the volatility of the equity is available on many commercially available programs. ( I used something called Optiontrader 98 for the delta). Your broker should be able to give you the same info. Delta changes constantly, and therefore it is difficult to judge moment to moment. In general, however, more in the money calls, higher the delta. Volatility is also available (McMillan's site - www.optionstrategist.com) - has this information. Charting programs like TC 2000 and TradeStation also have this info. Since you were looking at January options, there is not much loss in the time premium. As you know, time premium depreciates rapidly in the last 3 weeks of the expiration date. This has been educational for me as well. The chart of CHKPF looks excellent now. It gapped on 6/24 on a high volume after a short base, and now looks like a take off MACD, TSV, Money stream, Wilder's RSI are all bullish. Further, it crossed the 50 day MA on the upside on the gap. It should hit 40 in no time barring some crazy event. We will see. Girish Patel