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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: Michael W. Brom who wrote (6495)	5/22/1999 8:09:00 PM
From: SJS	Read Replies (2) \| Respond to of 17183

That's about what most charge, either 20 or 25 minimum + about $1.75/contract. What really kills you is the spread on options. I venture to guess that is the next great SEC crackdown (read: fix) for option investors. These guys have the nerve to charge 3/8 or 1/2 point spread on these options, many of them being under $3!! And for thinly traded options, then won't budge and work with you "in the middle", so to speak. EMC luckily has decent volume with it's options, and pretty good premiums, because it's volatile. You can "split" the difference in the bid and ask, and you, many times, will get filled. The Philly exchange, if you even trade there, is horrible. They don't give anything away. Sell the bid, buy the ASK, and nothing in between. So...ON TOP of the trading commissions is the spread. When you give away 1/4 point on a $1 option for the spread, and then another $30 bucks for commission, you wind up giving up 10-15% of your profits away before you start. On top of even that, the options can be undervalued, or overvalued in relation to the stock. Long story here, but there is a somewhat complex formula that determines how each option moves when the stock moves. It considers the time to expiration, the volatility of the stock, and things like "free" interest rate, etc. Good option traders use option calculators and modellers to determine if the option you are trading is correctly valued. Obviously, you would want to SELL overvalued options, and BUY undervalued ones. These tools (free to use at the CBOE option site: cboe.com) can help you if you can step up to the data gathering for volatility and other parameters and some "greeks" (read: mathematics) for understanding what you've just computed. EMC options, like most others, increase the premiums around the times of more risk. Like earnings announcments, etc. If you can stand that risk, you should sell your CC when the premiums allow you to take advantage of that risk with a larger return. The CBOE site has a free download option toolbox where you can get a tutorial with interactive graphs and charts, to TEACH you all you will need to know - all for free. Really cool stuff. I've learned over the years about buying options, and now don't. I'd rather sell them (puts and calls) as it is much more profitable. Best of luck. Steve