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To: Chuzzlewit who wrote (72989)	10/19/1998 8:11:00 PM
From: Lee	Respond to of 176387

Hi Chuzz, ..ReAs a writer of options I am making my money by selling time value to a buyer, so it seems to me that I want to maximize the time value per day. I want to sell options at the point where the slope becomes steepest. In all this options discussion, no one has mentioned the volatility. If selling options, I use big runups to sell calls (bonds). That way, one can sell both nearer time options because once there is any pullback at all, both volatility premium and remaining time premium are stripped very quickly. It also seems the best time to go long puts or vice versa for a big sell-off. Needless to say these are two days max trades. I guess the point is that in addition to remaining time value and intrinsic value, a third characteristic is volatility premium which is not a constant value. Regards, Lee

To: Chuzzlewit who wrote (72989)	10/19/1998 8:44:00 PM
From: Lee	Read Replies (1) \| Respond to of 176387

Chuzz, Option price calculator and Dell volatility for Sept. cboe.com cboe.com cboe.com Regards, Lee

To: Chuzzlewit who wrote (72989)	10/20/1998 7:59:00 AM
From: Geoff Nunn	Respond to of 176387

Chuz, re: Geoff, I agree with you right up until the time you reach your conclusion Sorry, what is it in particular that you object to? Do you not agree that, from the buyer's perspective, owning a series of successive short term options is preferable to owning a single long term option over the same period? Holding short term options gives you the prerogative to reset the strike price downward following a drop in the price of the stock. The buyer of a long term option is denied that prerogative. For him any drop in the price of the stock is cumulative, carrying forward to subsequent periods. For this reason a short term option provides a higher time value per day, so it is entirely rational for a buyer to pay more for it ( time premium per day). In your reply to me you focus entirely on the income derived from selling call options. You completely ignore the other determinant of investment performance, i.e., the loss the seller incurs - if any, when the option is exercised. If you write short term options you should anticipate that these losses will be greater. If you write long term options, when the underlying stock does well you may have a cushion. The stock may have performed poorly in earlier periods. With short term options there is no cushion. Therefore, if you write them you should anticipate that the losses will be greater because of the costs incurred in periods when the stock goes up. Please note I am NOT contending that writing long term options is more profitable. I don't know which is more profitable, and believe this to be an empirical question. What I am suggesting is that there is no free lunch. Geoff