Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Stefan who wrote (47383)	2/16/1999 11:50:00 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

Stefan, In all honesty, I don't have to be such a smart ass. But it is so much fun to watch the lame brains turn purple. <G> And I hope I don't pass on that trait to my progeny. I like the April 55s. On a bounce, I also like the 60s on MU. I take a backward look at evaluating options prices. First, I try to figure where the stock is going and the probability of it happening during the life of an option. If I figure my chance of getting a quadruple on that put is 50/50, I consider buying it. Now, lots of folks use models such as Black/Scholes. But the problem with these is that they don't look at the situation of the underlying co. If MU is losing money and definitely not going to turn a profit this year, though they may this quarter, the $55 is silly. I think the stock should go to $35 by April. Given that scenario, and I rate it 50/50, then $5 is the proper price for an April 55, IMHO. If you think the odds are lower, then you need a lower price to play. I know it sounds very unscientific, and it is, but I feel like the option price is controlled by the stock price. The more confidence I have that the stock is overpriced, the more willing I am to play for a certain put premium level. When somebody using Black Scholes tells me an options is underpriced given the volatility, it leaves me cold. They consider up movement and down movement of equal weight. That is the random walk influence. I think I know where the stock is going and play it from that angle. It works for me. I don't know if it has worked for that many other people. MB