Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 6/24/83; site mhuxi.UUCP Path: utzoo!linus!decvax!harpo!floyd!whuxlb!pyuxll!eisx!npoiv!npois!hogpc!houxm!hocda!spanky!burl!sb1!ll1!otuxa!we13!ihnp4!cbosgd!mhuxi!abeles From: abeles@mhuxi.UUCP Newsgroups: net.invest Subject: CBOE 100 Options Message-ID: <264@mhuxi.UUCP> Date: Wed, 3-Aug-83 10:27:55 EDT Article-I.D.: mhuxi.264 Posted: Wed Aug 3 10:27:55 1983 Date-Received: Sat, 6-Aug-83 03:57:56 EDT Organization: Bell Labs, Murray Hill Lines: 26 I have recently been approached by someone who got my name from an alumni list (we are both alumni of MIT) and who is a technical analyst. He suggests investment in options on the CBOE 100 index, and claims that the market is due for a decline. Thus he suggests the purchase of puts. My feeling about this is that the conventional wisdom today seems to be that the market is in for a "correction" (alias, decline). Anything that is conventional wisdom I feel must already be accounted for in the markets. Another aspect of this is the "Random Walk". For those who haven't read "A Random Walk Down Wall Street", by Burton Malkiel, the idea is that it has already been shown that no investors or investment advisors or institutional investors have been able to do any better than a randomly selected portfolio over the long term. That is, ther are no "experts". Malkiel includes technical analysts in his study and finds that they are likewise not experts. Thus, I am wary of this type of investment, regardless of the risk. Incidentally, while risk-aversion is the usually preferred investment posture, it is not obvious to me that preference for risk (gambling) is not entirely inappropriate in the short run. Any comments?