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

To: ratan lal who wrote (55844)	10/20/1998 7:43:00 AM
From: Gersh Avery	Read Replies (2) \| Respond to of 58727

Hi ratan: Let me try to answer some of that: There are two main factors that are used to determine the worth of any option: Time and the implied volatility of the underlying security. Once you can determine these you can plug the numbers into a nice math formula and determine the value of the option! One problem is the math formula was developed by one of the founders of LTCM (who proved that playing options involve risk no matter how smart you are). Since these guys proved just how much they really did know about the value of options, people got scared to sell them so their price went up. So, it looks like people are getting more used to the idea that the market is becoming more predictable again. As that takes place the volatility aspect of options goes down. The VIX index is a measure that shows the magnitude of expected moves in the overall market. I've been waiting to purchase any options until the VIX is below 25. The rate of decline in premium in puts shows how fewer and fewer people are expecting this market to head south. Gersh

To: ratan lal who wrote (55844)	10/20/1998 12:24:00 PM
From: Joss	Read Replies (1) \| Respond to of 58727

Hi Ratan, I think that the reply from Gersh about covers the subject unless you want to slug through the math. There are free, downlodable programs that will calculate implied volatility and/or fair value. But the bottom line when trading options (even on a day trade when vix is really collapsing) is get out before you lose money on the implied volatility side. The game is really stacked against the options buyer...but if you watch the strike and the vix, you can (sometimes <g>) make the game work for you. Steve PS...Sorry it took so long to get back...been offline.