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To: Jeffry K. Smith who wrote (112842)	3/27/1999 11:27:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Jeffry, the implied volatility is one of the parameters that determine the price of an option in the Black/Sholes model. The others are time, striking price, stock price, interest rate and dividends. Unfortunately, you cannot measure volatility directly, but since all of the other parameters are known, including the price of the option, the volatility can be calculated. Hence the term implied volatility. The higher the volatility the higher the price of the option. Some of us key options trading decisions to a comparison of the implied volatility (IV) and the historic volatility. If the implied volatility of an option is much lower than its historic volatility it might not be a good idea to sell (write) options, and it might be a good time to buy options. Hope this helps. TTFN, CTC

To: Jeffry K. Smith who wrote (112842)	3/27/1999 12:36:00 PM
From: edamo	Read Replies (1) \| Respond to of 176387

jeffry...re leaps/options terminology suggest you purchase "leaps" by harrison roth..it is plain english and will give you succinct definitions and outlined strategies.. 85/55..was the percentage change in the premium which is due to a change in perceived volatilty..an option strike rarely trades par with the underlying..for their is no incentive to buy or sell the derivitive..if common at 80 and put strike at 100, the premium would have to be more than the 20 difference or transaction would be biased and not work...the implied volatility which has to do with things as time and assumption of stock direction adds a premium to the 20 difference...the longer time, the more the premium..this factor easily assumed or calculated...it is the intangible psychological stock direction premium that is watched closely and sets the timing to buy/sell the option..i've been very basic..there is a bit more to it...just trying to lay out a concept..good luck,ed a. fotm=far out of the money strike price..