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Path: utzoo!linus!decvax!tektronix!tekecs!shark!patc
From: patc@shark.UUCP (Pat Conley)
Newsgroups: net.invest
Subject: Re: CBOE 100 Options
Message-ID: <1410@shark.UUCP>
Date: Mon, 8-Aug-83 13:14:49 EDT
Article-I.D.: shark.1410
Posted: Mon Aug  8 13:14:49 1983
Date-Received: Tue, 9-Aug-83 06:22:47 EDT
References: uofm-cv.228
Lines: 34

CBOE options are out and out gambling I think your analyst friend is just
out to churn potential accounts. As far as buying puts on any of the 
indicators i.e. SP100 or CBOE 100 and any other such thing especially with
puts the first thing to remember is the risk/reward relationship which
is ( 100% risk to lose all money / fixed gain if market collapses ).
Since the market is unlikely to collapse and you are very likely to lose
your money this is a very pad investment. Now for those super speculators
heed this message if you want to make a little money in puts you should
have bought last week... this is because options have two values of concern
intrinsic time value and speculative (greed) premium. The speculative 
premium on everything shot out of sight last week when the high interest
rates were first announced which in turn shot up the speculative premium
i.e. if you bought puts now you would be paying to much. ( Only buy puts
when there cheap!!!!!!!) The intrinsic value appears when the CBOE100
or whatever actually starts decaying, but heed this; this is where the
suckers get in. For more information on the option valuation see the Black and
Shoals model work ( one few true post academic usages of integral calculus )
this is useful for determining if your getting into options to late.
Since the current correction will soon go back as the current bullish
predictions are out for clear to december getting in to calls on some
very volatile stocks might be a good bet now that there cheap.
For calls the risk /reward is ( 100% risk /
unlimited gain ) i.e. theres no limit how high a stock can go up.
As for the broker who says to buy CBOE100 options the commisions are very
nice ( a guy could get rich in that business, perhaps much more than
any investor might) buy your friend a copy of the famous book "where are the
customers yachts",1942 an excellent book on the way brokers work.

I play options the tools I like best are options charts by Daily graphs
and on line NYSE quotation and order entry by C.d anderson/Trade master.
For people interested in options they should read Clasings book "DJ options
guide" and when you get really sharp pick up Macmillans "Options as a 
strategic investment". These are both somewhat technical books especially
the latter.