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Ira - rather surprised by your observation on public
perception of expensive OEX options with low vix's. I trust you were
half-joking.
Sure, VIX may be in a secular decline after the headbanger
market of the past 2 years... but I'm not so sure they're
"overpriced" - the underlying gives a 12-13 handle intraday range pretty
consistently, the eod players have low vix on their side, the eod travel range
is >50 points in <2 weeks - $13 for atm option is pretty reasonable, imho
- definitely better than the $19 that prevailed until recently.
While on volatility, the example of GE was used - but as with
everything in life, it ain't as simple as sticker price and % return - GE
options are juiced by the same iv numbers that make OEX "cheap" - while
acknowledging that a 1 lot GE controls a $5,000 asset while a 1 lot OEX controls
a significantly larger asset, and to compare like with like, all these factors
need to be considered.
The example of QQQ was used as preferential over OEX due to
its significantly large option volume - while the volume part may be true, QQQ
options have been a better sale than buy than OEXs in the falling implied
environment. Net change of under 5% over the past 2 weeks, and the atm
straddle collapsing by 30%+ - a bulk of which (>66%) came due to collapsing
iv.
Instruments of choice may vary, but it still remains a game of
risk & reward....of odds and ends.
Gitanshu
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