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Strategies & Market Trends : Daytrading OEX options with a method, not a trading system -- Ignore unavailable to you. Want to Upgrade?

To: HiSpeed who wrote (29)	10/13/1998 10:08:00 PM
From: ratan lal	Respond to of 62

Elementary my dear Watson - Time Premium really starts to deteriorate as expiration gets closer. Now its only 3 days away. On Friday at close there will be ZERO time premium. Also, AT ANY GIVEN MOMENT IN TIME, if you compare the premium on CALLS and PUTS at any given strike price you will find that the premium on one is greater than the other. That simply means that the MM are expecting the market to go in the direction in which the premium is higher. Today, for example, when DOW was down 100 the calls had a bigger premium that the puts simply shwoing that they expected the market to recover. If you had bought CALLS when the market was down 100, it would have to go up quite a bit for you to make any money. UNLESS you bought WAY INTO THE MONEY CALLS on which the premium was negligible. Its THEIR game. DOnt for a second believe that they made the rules for you to make any money.

To: HiSpeed who wrote (29)	10/13/1998 10:18:00 PM
From: Mark Z	Read Replies (1) \| Respond to of 62

HS - Were your puts in or out of the money? Check out what happened to semi-deep & deep in the money puts and puts expiring beyond October: cboe.pcquote.com Those were up. The OEX lost 2.42 (.5%) pts today even though the Dow lost 63 (.8%) (the divergence can be traced to EK and GE which are represented in different proportions in the 2 indices). If your puts were near or out of the money, you could only expect maybe 1/3 - 2/3 of the movement of the OEX i.e. .8 to 1.6 points. There appears to be about $6 worth of premium in near the money puts which is about 1.75 less than yesterday. This 1.75 stripping was greater than the .8-1.6 gain. Expect similar results for the rest of the week if the OEX remains in the relatively narrow range it was in today. Well, relative to the last 2 months at least. Suggestions? Your idea of selling calls to be on the 'right' side of premium stripping is a good one. If that's not viable, then when buying, if you anticipate holding into expiration week, consider deeper in the money and/or further out in time. One other note. The past few weeks, the OEX has not been a very good proxy for the DOW. If its the DOW you want to track, you may want to consider DIA-monds or the DJX options. I find it useful to keep a printout of the indices' components (see cboe.com )and the weightings of each component. Then if you know of specific stocks that are going to move, you can perhaps identify a better index to trade.