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To: Lee who wrote (71539)	10/12/1998 4:37:00 PM
From: TigerPaw	Read Replies (1) \| Respond to of 176387

OT Option Analysis ..is that one can sell puts which is actually a bullish indicator along with buying calls Which is why I think you would need a chart updated every 5 minutes or so to catch the trends more than the static values. One of the problems with looking at the totals is that some are positions people guessed at long ago and have abandoned to be called. These wouldn't have so much predictive value as the daily activity. It is hard to download the CBOE data in a format that can be manipulated (at least from the site I looked at). TP

To: Lee who wrote (71539)	10/12/1998 8:26:00 PM
From: nihil	Read Replies (1) \| Respond to of 176387

RE: Options price trends It is very difficult to model the stock options market. Two of the problems are: Conversion arbitrage -- a riskless transaction in which the arbitrageur (market maker) buys the underlying, buys a put, and sells a call -- options having the same terms. Thus a MM to balance his book can convert short calls into into long puts. Reversal arbitrage -- a riskless transaction in which the MM sells the underlying short, writes a put, and buys a call, thus converting short puts into long calls. Whenever a MM's computer tells him that a put or call is overpriced (according to Black-Scholes-Merton or whatever), he sells it, and when underpriced, he buys it. Conversion and reversal arbitrage permits him to balance his book better than simply hoping that premia and deficits will be wiped out through higgling. My impression is that there is not a great deal of this going on until expiration approaches, when volumes sometimes get high. Near-to-the-money Calls increase in price more rapidly than stock price during a run-up, and near-to-the-money puts increase more rapidly than stock in a downturn. If you want to sell covered calls, do it late in a runup (not yet, I hope); if you want to buy puts, they'll be cheapest if you buy them as (high deductible) insurance against a crash (getting cheaper everyday). If you want to buy calls, buy them as far in the future as you can stand (try the 2001 70-75 spread), and buy them at bottom (its not too late).