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Strategies & Market Trends : Help with OEX trading for Master's Thesis -- Ignore unavailable to you. Want to Upgrade?

To: NateC who wrote (10)	3/12/1999 4:53:00 PM
From: James Lumley	Respond to of 13

Nate, Sorry, I'm not familiar with IBD article you mention. But to defend my position that trading in options, the OEX as an example, should not be done on a casual basis. However, whether, it's the OEX, index sector, or individual stock, the movement of the underlining index or stock upon which the option is based must be followed closely. For example, I trade OEX options. To do that, not only do I follow the OEX in 'real time,' but also the NYSE Beta Index, the Nasdaq 100, the S&P 500 futures contract, to name a few. And, of course, use appropriate technical indicators, such as Stochastics, Relative Strength, MACD, etc. It's not brain surgery, but it's not that easy either. You got to be on the ball and thinking all the time so that you're not just gambling and guessing. Oh, yeah, it's guys, and gals too I hope, that eat the casual options dabbler for lunch. So, don't 'ivory tower' your master's thesis too much, a lot of it's trench work.

To: NateC who wrote (10)	3/12/1999 5:10:00 PM
From: James Lumley	Respond to of 13

Nate, To follow up on my last post, I usually don't hold OEX options overnight as opening next day could erase any profits. I will point out that even over the course of a few hours the 'volatility' can affect an option's price. For example, if I buy a call option at 10:30 and sell at 12:30, and during that two hour period the volatility decreases (as it normally will when market is rising) it will depress the value of what I gain in the option. By contrast, if I buy a put when the market is falling, the volatility generally rises and the value of my option expands more than it would on normal price movement alone. Hope this is helpful. I'm sure you probably know it already. it's one of those occurances when theory (black-Scholes formula) and reality collide. Jim