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To: Dale J. who wrote (64687)	9/14/1998 12:07:00 AM
From: John O'Neill	Read Replies (1) \| Respond to of 186894

Put leaps as a HEDGE only..nothing against INTC

To: Dale J. who wrote (64687)	9/15/1998 2:43:00 AM
From: Gerald Walls	Read Replies (1) \| Respond to of 186894

Yeah the premiums are always expensive after a sudden drop. I don't know exactly how options are priced. If it is just market supply/demand like a stock or it may be tied to a volatility formula. Both. The Black-Scholl's (sp?) method of options valuation is an involved calculation that includes both the projected risk-free return on money (projected T-Bill rates) and the volatility of the underlying security among other variables. This formula gives you the theoretical value of the option. Excess supply or demand can cause the price of the option to stray from this value, but if it strays too far the big money guys come in and take the other side of the trade to take advantage of the excess optimism or pessimism. Since volatility is involved in the calculation this explains why premiums are higher after a sudden move up or down in the underlying security. The surviving inventor of the pair won a Nobel Prize in Economics for this formula last year or the year before.