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Strategies & Market Trends : Options-Technical analysis -- Ignore unavailable to you. Want to Upgrade?

To: browser who wrote (1)	10/7/1998 10:21:00 AM
From: Caroline	Read Replies (1) \| Respond to of 296

TXUDJ TXU Apr99 50C tscn.com TXU sure is pretty. Even with the stochastic about to signal a sell... The APR 50 C is out of the money, so the $1.18 price is pure time premium. Meaning, as I'm sure you know, that theoretically, the price of TXU can go up $1.18 without TXUDJ moving a bit. The August historical volatility for TXU is 23.99: cboe.com (do a text search on TXU) The currently volatility (delta) on TXUDJ is 39.05. Normally, one wants to buy low volatility (23.99) and sell high volatility. In fact, the previous month, TXU volatility was only 14.592. Another way to look at this is that TXUDJ is three times more expensive than it was in July. cboe.com So the final test is how the option is faring under all this pressure: tscn.com. Not bad at all. How do others feel about it? Open Interest is 15, and Friday's volume is 28. So there was a net outflow from the issue on Friday. But the numbers are so small it's difficult to draw any conclusions from TXUDJ itself. The largest open interest on this screen: cboe.pcquote.com TXUMH... looks like someone bought 600 Jan99 40 puts. That's not the general public, I think, it's probably one trader. A $37,500 bet on the downside. Utilities are "safe" in this environment, and TXU is pretty the way it just goes up and up... definitely something to think about... More later... cb