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<DIV><FONT color=#000000 size=2>I am sorry but the cash price of the share is
relevant to the option price</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT><FONT size=2>the example just doesnt make
sense for the call to be so expensive it must be in the money or a long maturity
likewise for the put to be so cheap</FONT></DIV>
<DIV> </DIV>
<DIV>Ok, Here's the chart. Let me know what your opinions are as to why
the call had more than twice as much loss in value compared to the
put. Yes, the put gained value because the stock dropped from 138 to 90,
but, look at the relative difference in loss/gain of value. The call lost
1600% value, the put only gained %700. </DIV>
<DIV>The call was $38 in the money, the put was $38 out of the money at the
start. They are both Aug 100 (In this case, at least, the H is for Aug, T
for 100)</DIV>
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<DIV>The point here is, the call went from 40 to 2.5, a 1600% decrease in
price, </DIV>
<DIV>the Put went from 1.5 to 10.5, a 700% increase in price. What I was
pointing</DIV>
<DIV>out was that, as a market maker, had I sold you 1 call at 40 and 1 put at
1.5,</DIV>
<DIV>I would still be ahead 40 - 2.5 = 37.5, 1.5 - 10.5 = 9, 37.5 - 9 =
28.5. So, </DIV>
<DIV>I would have a 28.5 X 100 = $2,850 profit for each of a call/put
combination sold.</DIV>
<DIV>That is why I said the price of the stock is irrelevant. Yes, the
stock dropped</DIV>
<DIV>significantly, but, look what the options did. Yes, there is more
to being a </DIV>
<DIV>market maker than this simple illustration, but, there is a distinct
advantage</DIV>
<DIV>to selling verses buying.</DIV>
<DIV>Kohath</DIV>
<DIV> </DIV>
<DIV> </DIV>If you feel that the stock price is irrelevant, I'll take the
other side of your trades all day long. The conversion reversal
would have kept the puts and calls in direct relationship to one
another. It looks to me like the calls started in the money and then ran
out. Half a truth doesn't prove that you are right. Ira.
<BR>kohath wrote:
<BLOCKQUOTE TYPE="CITE"> It's irrelevant where the stock was then and
where it is now. The point is,Selling always brings in a higher
percentage than buying, always! Becauseof the melting value of
options, but, with selling there is limited profit withunlimited
risk!Kohath You left out one very important fact. Where was the stock
at point one and at point 2 in your example. Why don't you post the stock
chart too? Ira.
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Charts of AMZN 100, Call, Put.Call went from $40 to $2.50, put went from
$1.50 to $10.50.As can be seen, same strike, same time frame. This
is whyselling is more profitable than buying, but, selling involvesmuch
higher risk. These two charts also show the marketmakers have a
distinct advantage because of the meltingvalue of the options.Now if we
had only sold 100 contracts of the YZZHT on July
16th!Kohath </BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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