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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Peter Church who wrote (11900)	7/28/1998 1:51:00 AM
From: umbro	Read Replies (1) \| Respond to of 164684

Peter, the "i.v." is "implied volatility" ... this is a measure of how expensive options are (the higher the i.v. the bigger the potential price move priced into an option). This value is a key parameter in options pricing models. The IV has been dropping steadily on AMZN ever since earnings were announced. AMZN is trading with about 2.5 times the IV of MSFT, which should give you an idea of the markets expectation of AMZN future changes (volatility) in price versus MSFT. The broad market's IV is about 22% right now, or 4 times lower than AMZN. I track the put/call ratios in Open Interest and today's trading volume and look for extremes one way or the other. In all things except AMZN, the market has a tendency to correct excess, so mostly I look at extreme values of R (greater than 2.0 is bullish and less than 0.3 is bearish from a contrarian point of view. There is usually a built in bias in favor of calls, so values of 0.6. to 0.8 are not really extreme). The other numbers printed as 'forecasts' are really just hypothetical, they give the market's current bias. Many traders believe that the majority is wrong, and therefore interpret things like put/call ratios from a contrarian point of view. Right now, the option market sentiment looks pretty neutral to me, and are trading more/less at a fair volatility given AMZN's ability to move. The bible on theory and practice in options trading is "Options As A Strategic Investment", by Lawrence McMillan. Here's the B&N link: shop.barnesandnoble.com His newer book, "McMillan on Options" is good also, and delves more into trading options, especially index options, and discusses various simple but profitable (so far :)) trading 'systems', most on s&P and OEX options: shop.barnesandnoble.com