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At 08:13 AM 2/10/98 -0600, Gregg Murray wrote:
>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.
I concur. The market behavior of the underluying, the interest rates and
the diviedend and other factors play their parts.
>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.
>>
>
There's the issue of historical volatility. How big a factor is that?
Supply and demand for the optionm, per se, is dependent on so many other
factors that it's not very meaningful to talk about that as an *operative
factor* by itself. Figure out (as some of us are trying to do) how the demand
and supply for the underlying, interest rates, dividends and volatility of
the underlying affect the options: then you have the philosopher's stone.
Add to that some other fundamentals of the issue. Pretty soon the simple
formulas are "mush." We are each on our own.
Pete
petena9090@xxxxxxxxxxxxxx
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