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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Brad Bolen who wrote (29792)	10/1/1998 11:03:00 PM
From: Moominoid	Read Replies (1) \| Respond to of 94695

A put option is AS IF you borrow a pile of money from someone at interest and use that as a deposit to short stocks and don't get any interest on the deposit or the proceeds of sales and place a stop loss order. Datek (for example) doesn't pay anything on the proceeds and I think they don't on the deposit either. As the expiry date approaches leverage (delta) increases and so the time erosion speeds up - as if you borrowed more money the sooner you get to expiry. This all makes the most sense if the option remains near the money. This is just a thought experiment or model to compare the two types of investments in similar terms. David