I have been holding a stock that has lost 20 percent in value. It seems to make sense to sell at this point as at the point of buying it I did not hedge the shares! However, instead of selling it and taking an outright 20-percent loss, would it make sense to write a call at its lowest strike price giving a premium that is equivalent to the selling price? Or are there any other alternatives?

You mentioned not to place market orders to buy or sell on the opening. I recently did so on an Internet stock and got creamed on the price I paid. Is that why you don't do it?

I have a general question about options and arbitrage using an example of one year until expiration on both American and European calls with the following information: With a strike price of 40, the American call is worth 10, and the European call is worth 8. With a strike price of 50, the American call is priced at 7, and the European call is worth 4. Is there any arbitrage opportunities in this example?

I have been paper trading an account for some months and there's something that confuses me. Say stock XYZ is trading at 207 today and the January 210 call is trading around $23. Isn't this free money? If I buy XYZ at 207 and immediately sell the January 210 call, where's the downside? If the stock appreciates, I make 100+ percent annualized. If the stock tanks, I keep the premium and roll down. Is my math wrong?

Occasionally in your Market Observations, you mention Fibonacci levels. Can you explain in greater detail what they are?

Why do historical volatility charts have to be looked at for periods of 20 days, 50 days, one year, etc., rather than on an ongoing daily basis, just like regular stock charts? Also, why is historical volatility compared to implied volatility to determine if the option is over/under valued? Can't you just use past implied volatility to see whether the option is at the high or low end of its implied volatility range?

How soon after an IPO (initial public offering) can a stock get options listed on it?

For most stocks, the option quotes for the third month are not available. Why?

Can I trade covered calls and sell puts on an index such as the S&P 100 Index (OEX) just like I can with a stock?

The current price of stock XYZ is 100, and the current interest rate is five percent per year. There is a special option written on XYZ with the following conditions: If, on any given day, the price of XYZ ever hits 120, the holder of the contract gets $120 and the contract expires. If the price of XYZ does not hit the $120, the holder gets nothing and the contract lives on to the next day. (Note that the contract may live in perpetuity). What is the current value of this option, assuming that interest rates will always be positive?

I am interested in trading in options. But I would like to know where the money I am "going to win" is coming from. Is there any analysis of the make-up of the players in the options market?

How or where do you find out whether your option contract is an "American style" or a "European style"? Your web page is great—keep up the good work! Thanks.

If I am short an option what is the process for determining if I am going to be assigned?

What is an "efficient portfolio"?

I have been holding a stock that has lost 20 percent in value. It seems to make sense to sell at this point as at the point of buying it I did not hedge the shares! However, instead of selling it and taking an outright 20-percent loss, would it make sense to write a call at its lowest strike price giving a premium that is equivalent to the selling price? Or are there any other alternatives?

Occasionally a stock, particularly if volatile and nicely suited to option trading, will have a delay in opening due to an "order imbalance." Could you explain this phenomenon and what the implications are for stock and option traders?

My wife and I trade stocks and mutual funds with two brokerage firms in our IRA accounts. These companies will allow us to buy calls and puts in these accounts. As soon as we can learn more about options to paper trade consistently well, we will start buying calls and puts in our IRA accounts. Could you give us information and help so we can begin buying calls and puts?

I keep hearing the phrase "overhead call resistance." Could you please explain what that is and its impact? Also, if this is a valid concept, is there an opposite force at work on the put side, i.e., "underneath put support"?

Should volatility be a factor if one is strictly playing momentum, i.e., split, earnings, or some major event, and plans to be in the option only as long as the event, say one or two weeks, provided the trade is closed either before or at the time of the event?