BBS: Channel 1(R) Communications [ATI 2400 v.42] 617-354-7077 Date: 02-18-93 (14:45) Number: 13469 To: KIRT MCALEXANDER Refer#: NONE From: JACK HOCH Read: NO Subj: OPTIONS REPOST 3 OF 3 Status: PUBLIC MSG Conf: Finance (52) Direction: FORWARD Ok, we finally have the end in sight....(are you still sane???) . Here are some general conclusions: 1) In-the-money options are less risky than out of the money options because in-the-money options possess "intrinsic value". 2) Your % gains and losses with in-the-money options are normally less than those for out of the money options. Less risk and less reward. 3) The further out in time you go for a given strike price, the more expensive the option, but the slower the rate of change of price of the option. 4) The "decay rate" of the "time value" for options increases as you draw closer to option expiration. 5) Volatility of the underlying stock greatly affects the premium (time value) above the strike price one pays for a given option on a stock. The more volatile the stock, the more expensive the option premium. 6) Options = leverage. Using options, you stand to profit or lose close to the same amount as if buying the stock, but you're using much less principal. However, the odds of "winning" with option buying is less because of the time constraints. 7) Different investors use the leverage provided by options in different ways. Combining in-the-money and out-of-the-money options allows an investor to define his/her risk. 8) The most important aspect of option buying relates to the quality of the underlying stock. Analyze the stock first, then try to find the option which most suits your situation and risk tolerance. Well, I'm fried. I can't believe I went on like this for 3 entire messages, but if it does anyone any good then I'll feel vindicated. Let's hope the stock market isn't as boring in the future as it was today! .