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Jim:
It's pretty clear that supply/demand do play a big role in option prices.
If you can, take a look at some tables of implied volatility of some
options and compare strikes across different expiration months. They
oftentimes vary quite a bit...IV is a measure of supply/demand with near
options in greater demand. If supply/demand were not an issue, the IVs
would be pretty close because the only thing effecting them would be
varying opinions of interest rates (which generally have a very small
impact) and dividends (which also would have a small impact on IV). You can
also compare different strikes and see a difference depending on "market"
opinion on direction the underlying is expected to move.
Good trading,
Gregg Murray
At 01:31 AM 2/10/98 EST, JamesinLA@xxxxxxx wrote:
>In a message dated 98-02-09 15:46:28 EST, you write:
>
><< But ultimately, options are priced based on supply and demand. Always
have.
> Always will be. >>
>
>I have heard option gurus contend that supply and demand does not affect
>option price.
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