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Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: pham who wrote (7740)	8/28/1998 4:55:00 PM
From: M. Frank Greiffenstein	Read Replies (1) \| Respond to of 14266

Subtraction... Pham, you first detemrine the difference between the option strike price and the current stock price. So if THQI is at 13 and the DecCall has a strike of 11 5/8, the option is 1 3/8 "in the money." So, the intrinsic value and the amount "in the money" are the same thing. You then subtract the intrinsic value from the price of the option. What is left over is the $ part of the option that represents volatility and time. The longer the time to expiration and the larger the volatility of the stock, the bigger the premium. Long time and high volatility are "good" for options for the common sense reason that more things can happen over a long period than a short period. In other words, you have greater probability of making a profit with a volatile stock than a stable one. You have to pay extra for that. Stay away from out-of-the money calls and puts with a short time frame. Only professionals buy out of the money options to protect their long (or short) positions. DocStone