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Dear Paul,
Because of the general nature of your post,I thought I would post the
answers publicly.
1.The average of the option premium is roughly $200 to $250.
2.The sought for execution price is determined by a computer program.
3.The options are naked with the exit rules as previously described prior to
any disaster.
I will be happy to post monthly results starting in Jan. for comparison
purposes.
Sincerely,
John
>From: "Langham, Paul" <paul.langham@xxxxxx>
>To: "'Dr. John Cappello'" <jvc689@xxxxxxxxxxx>
>Subject: RE: Option Trading Questions and Answers
>Date: Wed, 29 Dec 1999 12:33:42 +0100
>
>Hi John,
>
>Thanks for your excellent option post.
>
>As you know I trade options almost excluively, also selling so more
>questions I'm afraid.
>
>1. Are the options you have found just 'tinnies' i.e yes they are
>theorectically overpriced by twice what the model says the should sell for,
>but the actual dollar premium you earn is so small that you can't actually
>trade them taking into splippage and commissions.
>
>2. Maybe I have this wrong but understood you trade only those options
>which
>are overpriced by being double what the module says based on current
>implied
>volatilities - presumably you use the at the money option to calculate this
>? If so then I'm missing something as yes you do see options at 20,30,40,50
>% over what the model says but 100% on a regular basis? Maybe you mean
>double when compared to what the normal historical volaitility would say ?
>Not sure if I make myself clear there.
>
>3. Do you cover at all. R these just naked ?
>
>Thanks for your help and good trading.
>
>Paul Langham
>
>-----Oorspronkelijk bericht-----
>Van: Dr. John Cappello [mailto:jvc689@xxxxxxxxxxx]
>Verzonden: woensdag 29 december 1999 0:43
>Aan: Realtraders@xxxxxxxxxxxxxxx
>Onderwerp: Option Trading Questions and Answers
>
>
>Thanks for the interest in this topic.The prevailing questions were:
>
>1.Which options-I looked over 7 months of statements and found these:
>JY,SF,E-mini S&P,Cattle,Nat Gas,Pk. Bellies,BP,Coffee,Unleaded,Lean
>Hogs,T-Bonds,Soybean,Corn,Gold.
>
>2.Exit strategy-there is a probability program whereby an option is exited
>if it comes within 50% of being in the money.
>
>3.I do not know enough about the option pricing model yet to help.
>
>I plan on starting this in Jan. with $10K and will give you a monthly
>appraisal.
>
>Sincerely,
>
>john
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>
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