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The workings of the newbie's mind will be evident in the post below, but
I would very much appreciate the feedback of the resident options aces.
<P>Buy 2 January soybean 525 calls @ 21
<BR>Sell 1 January futures at the market (assuming it stays reasonably
close to Friday's close at 628.25.)
<P>Reasoning:
<P>- Have read that low volatility often precedes substantial moves (for
example, the Raschke/Connors hisvol. gambit: if the 10 day falls
below the ½ of the 100 day etc.). Seems hisvol. is currently
low in the beans.
<BR>- Low implied volatility here, so the options ought to be good value.
I am using the options ranking at cyberramp and also the "ticks over fair"
at pmpublishing. But is there a set formula I can use to gauge when
an option is really cheap or not, some criterion I could apply?
<BR>- The trade is pretty well balanced from a delta standpoint:
position delta +1.08. I've been told that this would enable me to
profit either way, as long as the beans really do <B><I>move</I></B>.
I'm not so very adept at making directional calls, but don't the beans
look like the proverbial "historical opportunity"?
<BR>- Jan. calls have 106 days to expiration. Something's gotta
give by then, no? I mean, they're not gonna go <B><I>sideways</I></B>
for 3 months! (Famous last words.)
<BR>- Other considerations: commercials are very long (97% on COT
index); 7-year price low.
<P>I could also use some pointers in calculating how far price would have
to move for the position to be profitable.
<P>Thanks,
<BR>Philip</HTML>
</x-html>From ???@??? Sun Sep 06 14:24:24 1998
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