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Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: EJ who wrote (205)	9/9/1998 11:25:00 PM
From: AurumRabosa	Read Replies (1) \| Respond to of 355

Nice market call but your bear spread scares me. IMNX has 125% implied volatility and for a reason, it moves a lot, like today's $6.125 drop. If you put this short Sep 70 call/long Sep 75 call bear spread on at the highest possible price today you would've netted $1.09. Had IMNX moved up $6.125 instead of down this bear spread would be worth about $0.20. If it expires at $75 then it'd be a loss of $3.91. If IMNX moved to $75 real fast you'd be carrying a debit of over $7 waiting for expiration so the time premium would decay away. I look at IMNX and see a short straddle staring me in the face. Sell the Sep 55 call for $7.125 and sell the Sep 55 put for $6.25 to net $13.34 with only 8 days life left. That gives breakeven points, at expiration, of $42 on the downside and $68 on the upside. With IMNX having been in a $50 to $80 trading range for the last year I think that's a decent bet, unless, there's bad news like an FDA NDA denial, then jump quick. Big problem is I don't think I could find takers for the other side of the trade. Even the long call Sep 55 butterfly looks pretty good with a maximum profit of $555.50 and minimum profit of $55.50 assuming you could get it put on at the closing ask prices of today.

To: EJ who wrote (205)	9/10/1998 6:11:00 AM
From: FRANK J	Read Replies (1) \| Respond to of 355

if both spreads have the same expiration,how do you treat this play if you are called or close to being called in your opinion?

To: EJ who wrote (205)	9/10/1998 8:24:00 AM
From: RBane	Read Replies (1) \| Respond to of 355

EJ, I like your explanation, but, I think a far superior play would be to sell the IMNX SEP 55 C @ 6 5/8 and buy the SEP 65 C @ 1 11/16. Maximum profit is 4 15/16 and maximum risk is 5 1/16. Selling options when the stock is close to the strike price is beneficial since, as we all know, the time value is maximized when the stock is at the strike. In the 55 call option case, of the 6 5/8 premium, 5 3/4 is time value and only 7/8 is intrinsic value. I'm interested in hearing your thoughts on this. Good trading, Ron