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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: bazooka who wrote (4002)	12/21/1998 8:59:00 PM
From: Lost in New York	Read Replies (1) \| Respond to of 4969

btw- on this option (priced at 100) it looks like your only paying a 3 1/2 point premium (176 1/2 <ibm's current price> - 80 <the strike price> equals 96 1/2) for 1 year in time value, seems cheap to me; please tell me if i am wrong Here's my opinion, anyone else, feel free to correct me. First, I'd go find and read a copy of Options as a Strategic Investment by Lawrence G. McMillan. I think the premium is so low because there's not much risk for the person on the other side of the deal. I suppose IBM might collapse but it's not likely. He's pretty sure a year from now the shares will be called from him at $80, so there's not much need for premium. He will just lock in a small profit above his costs and go on to the next trade. I'd wonder why anyone would bother. I suppose only if they could go long options yet they don't have their account set up with margin. You could just as easily buy 100 shares on margin, put up $100/shr, and borrow the rest and also keep the dividend. I don't think you'd see much difference. Dave