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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (112847)	3/27/1999 12:09:00 PM
From: On the QT	Respond to of 176387

Amen! Best Regards, QT

To: Chuzzlewit who wrote (112847)	3/27/1999 1:54:00 PM
From: PAL	Read Replies (1) \| Respond to of 176387

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. Chuzz: Your sentence is so valuable that it should be framed for option traders. You cannot have said it better. Volatility is a factor in deciding which expiry date you write or buy an option. The following is some exceprt from "Blue Print", a newsletter from CBOE. Since I cannot find the link, I will just type in some of the highlights. The article is from Brian Overly, Senior Staff Instructor CBOE: One of the least understood topics in the world of options pricing is the effect that news has on an option's price ... Since options are risk transfer instruments, their prices are determined in a way that is similar to determination of insurance premiums. ... If there is a significant discrepancy between the analysts' expectations and the final earnings (either higher or lower), the stock's price may fluctuatedramatically. When such risk exists, the associated higher uncertainty in the market translates into higher option premiums, because options help reduce or eliminate that risk... If you were to buy a call prior to the release of the earnings report, you would paying an enormous premium because of that uncertainty. After the earnings are reported, however, market uncertainty could disappear and market conditions could return to "normal". As a result, the price of the call (which had increased because of the rise in uncertainty over the earnings report) may decrease when the earnings are reported. Even if the stock price does not move in reaction to thhhe earnings repotr, if the heightened anxiety subsides, then the call's price may decrease ... Remember, the option is more expensive prior to earnings report becuase of the potential for a sharp fluctuation in the price of the stock following the report. Once the uncertainty is gone, the option price may decline, even if the stock price does not. Next earnings report for Dell is May 18 after the bell. May option expires May 22nd. Best reagrds Paul