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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Tony B who wrote (7919)	7/22/1998 8:30:00 AM
From: Herm	Read Replies (1) \| Respond to of 14162

I can't really say Tony! Perhaps something having to do with the implied volatility being higher than the historical volatility. Thus, the extreme value in the pricing. There are only three variables involved in the pricing: 1. Intrinsic value - actual dollar for dollar value. A $30 strike price when the stock is at $32.50 has an intrinsic value of $2.50. As far as your question, it is obviously not intrinsic value that makes up the major part of the pricing. 2. Time value - There is some time lefted. So, ok there is value there. 3. Implied Volatility - As of this writing, CPQ has a volatility of 33.9% for the past 20-days and for a Half Year: 47.2%. Perhaps someone can give us an idea if that 33.9% is high. That math is too much for me! Ask Doug!

To: Tony B who wrote (7919)	7/22/1998 1:26:00 PM
From: Vol	Respond to of 14162

Re: Disparity in Prices of Puts and Calls There are 5 or 6 variables that go into pricing options, so the answer is somewhat complex. One reason for higher call price and put price is the dividend. The higher the dividend, the higher the price of the call and the lower the price of the put. www.cboe.com explains all this. BTW their free options toolkit is helpful in pricing options and playing "what if" strategies. Vol

To: Tony B who wrote (7919)	7/22/1998 5:21:00 PM
From: EJ	Respond to of 14162

TB, Supply and demand...people are simply currently willing to pay more for the call. If you want to watch something interesting with respect to this, watch the price difference between out of the money calls and puts on the OEX (S&P 100) index. At times (fairly rarely) you will see calls trading as high as 5, 6 or even 7 times at much as the equivalent distance out of the money put. When you see it get near 7, try buying puts and/or selling calls...it not a sure thing, but it has been successful in the past. EJA