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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (24875)	10/5/1998 1:38:00 PM
From: Fortinwit	Respond to of 70976

Jacob: 1. Never place a market order for an option, 2. Your technique of splitting the bid/ask is good, IMO, 3. MacMillian's Options book is the 'bible' for this stuff... Good luck on the LEAPs... F.

To: Jacob Snyder who wrote (24875)	10/5/1998 1:43:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

to: experienced option traders again: I just looked at the CBOE site. It shows the last sale at 3 7/8 (my buy which just cleared). However, it still shows the bid/ask at 3 3/4-4. Since they were obviously willing to fill a order below 4, shouldn't the ask have changed to 3 7/8 when my order went through? How do they come up with these numbers? Is there a trader sitting in an office somewhere, who makes the quoted bid/ask up? Does he, or someone else, use the quoted bid/ask as a rough guide, but he is free to do whatever he wants? So, is there a "real" bid/ask, that the market maker is willing to trade at, that is different from the quoted bid/ask? I'm confused here. I like my numbers to be less slippery.

To: Jacob Snyder who wrote (24875)	10/5/1998 3:01:00 PM
From: Robert O	Read Replies (1) \| Respond to of 70976

I guarantee I'm not nearly the most experienced option trader out here but I can tell you from, at times, very costly experience the answers to some of your queries. First, the best advice I ever ignored came from an option specialist in Kodak. His general observation about using options to speculate for trading profits was: the problem with options is that their value deteriorates so quickly. How true! You are paying a premium for underlying volatility and time for the most part. A fairly bright cat from University of Chicago, with his equally bright pals, came up with the Black-Sholes model for valuing options. It's now universally used today to determine the "right" price. If we all "know" the "right" price what's with these crazy bid/asks? I submit it's the usual game of screw Joe Lunchbox. When volume is limited, and that's almost a given, investors are at the mercy of what may be a misnomer, but I'll call, the market maker for AMAT options. I was told by Fidelity, incorrectly!, that if I bid for option contracts at the ask that the MM stood ready to sell at that price. They forgot to mention that the number of contracts makes a huge difference. I've bid for contracts at the ask (less than $4,000 worth) and have had the MMs simply raise the bid to what was the ask and then raise the ask another 30% higher. It's crazy!! A market order is suicide and only an option if you MUST create or liquidate a position. A market order for AMAT will always be filled (at the worst possible price for you) because there is enough volume. In smaller volume issues options are a nightmare!! If others would like to chime in feel free. I could go on, but I have to get more coffee. Also, I'm only a quarter of the way through an excellent book on options. After I finish, I plan on writing up a highlighted summary with detailed examples in Word for a friend. At that time I will provide a link to it at my homepage for anyone interested. RO

To: Jacob Snyder who wrote (24875)	10/5/1998 3:07:00 PM
From: Berk	Read Replies (1) \| Respond to of 70976

Jacob My experience is with normal options not LEAPS but the differences shouldn't be that great: 1. A split between B/A is a good starting point but no guarantee 2.NO. NO. NO. Ad infinitum. 3.Should be the same. 4.MM's can fill it themselves, either with or without the offsetting hedge in another option(s) or stock.If they are making a market in the option, they have to fill it but may have a limit on the size of the trade.They should honor their bid or ask.They are obligated to fill a market order but may only do it to a certain size (expressed in the pit on the open outcry).

To: Jacob Snyder who wrote (24875)	10/5/1998 4:49:00 PM
From: Math Junkie	Read Replies (1) \| Respond to of 70976

Jacob, I also use ETrade, and have not been able to find any way to look up the symbols for leaps. Are you able to do that on ETrade, or do you get that info somewhere else? I take it from what you wrote that E*Trade does let you trade leaps.

To: Jacob Snyder who wrote (24875)	10/6/1998 11:48:00 AM
From: Tito L. Nisperos Jr.	Read Replies (2) \| Respond to of 70976

Hi Jacob, Since you have already found the answers on how they price Options from some helpful people in this thread, I 'll just come to say you got the Right Move in buying those LEAPs. We as human beings are trapped in this planet experiencing night and day because of the way the earth rotate on its axis facing the sun. We can not do anything about it but expect that after the night is over comes the day; and when the day is done comes the night... Thru experience as investor, you get the feeling that sometime later the Market bottoms and go on to hit new highs and new highs until it turns around to seek the bottom again... When you bought your first 100 LEAPs for 6/sh you based your decision on your experience that night will later turn to day. You bought another 100 at 4/sh knowing that the LEAPs could easily go back to 6/sh in a day or two of Market turnaround and make a quick profit on your latest investment... We know from experience that the Market after a decline that last a year retraces its step Up for about a year also. AMAT, like most Silicon Valley stocks goes back Up to hit new highs (is it a coincidence that AMAT's trading range in this Sep and Oct is at 23 to 28 --- almost the same as in Sep and Oct at the bottom in 1996?)... With more than 2 years life in your LEAPs I'm almost 100 percently sure that you will make a lot of money with your LEAPs more or less a year from now... When at the bottom in summer 1996 I bought those 4/sh LEAPs that became 80/sh LEAPs 9 months later, my decision was based on the knowledge that night will always turn to day later; and I was right. PEs and bad market conditions were put aside in favor of life experiences... I'm wishing you Good Luck in your LEAPs even if I'm sure you will surely attain your goal. (isn't more than 2 years too cautious? But then I know you are a man who wants all risk reduced to a little or none at all!...)...