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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Linda Kaplan who wrote (55381)	10/13/1998 1:27:00 PM
From: HairBall	Read Replies (1) \| Respond to of 58727

Linda: No options expert here...and why do I post on this thread you may ask...I don't know! <g> Guess I like the crowd... Regards, LG

To: Linda Kaplan who wrote (55381)	10/13/1998 1:32:00 PM
From: SJS	Read Replies (1) \| Respond to of 58727

Huge premiums exist on options typically before earnings announcments because of the tremendous volatility in the stock price that event could bring. the option, now, is more in line with it's value of intrinsic value + a more reasonable premium (since the now "known" earnings event has passed). If you can stomach the earnings season and are well versed in options, you can get this "volatility" money in your pocket vs someone else by selling (with a hedge) this premium instead of buying it... You need to be well capitalized, because you won't always guess right. Just look at Kodak today. If you had sold puts, you'd be in a little more trouble that if you had sold calls. Then, you'd be smiling :>)

To: Linda Kaplan who wrote (55381)	10/13/1998 1:41:00 PM
From: Lee	Read Replies (1) \| Respond to of 58727

Linda,..Re: so wouldn't have expected the put to be bid at 12 now, but 4-3/4 seems surprisingly meager, doesn't it? Is there any way to predict anything about this phenomenon? Linda, I am no option expert but it may have something to do with decreasing volatility. A good place for info is the following site which states that the current volatility is 24 but I don't know what the historical volatility is. There is also an option calculator where you can plug in the numbers, including the volatility and see what the price should be. cboe.pcquote.com cboe.pcquote.com cboe.com Good luck, Lee

To: Linda Kaplan who wrote (55381)	10/13/1998 2:14:00 PM
From: AlanH	Read Replies (2) \| Respond to of 58727

Linda -- re:EK options No expert, but a couple of thoughts... When EK closed last night, the bid on the put was 1-1/2, now EK is down almost 11 points but the put is only bid at 4-3/4. It's in the money now, with a strike of 75, while the stock is at 72-11/16. It seems like the entire (large) premium is being evaporated today, all in this one day, though it's a November put and has a month to run. Sheesh, 3x in one day and you're complaining? <ggggg> Seriously, this is a value issue where 1.5 may have been overvalued and 4.75 may be undervalued. This flows into the fundamental question: Is there any way to predict anything about this phenomenon? Yes, but it's rocket science to most of us. Of course the objective is predicting volatility, but opinions vary as to the use of historical, statistical and implied volatility as well as associated "skew." Results are then applied to a price model -- such as Black-Scholes -- to calculate theoretical option prices. (Depite media hype, Black-Scholes is the best thing going IMO.) It isn't practical to cover the "Greeks" in this passage, although you may wish to research Delta, Gamma, Theta, Vega, Lambda and Rho; these open some doors to... er, more questions... but may assist in expressing the relationship b/t underlying stock, volatility, time, risk-free interest rates, etc. You may also find probability calculator programs helpful, although these are intended for predicting potential profit based on statistical stock price calculations. As you can see, there's no clear or universal answer. So, many people simply follow FA/TA principles, set stops and lock profits/cut losses based on preference or behavioral stuff. Gasp Hope this helps. Alan