Option Conversions
A conversion involves buying the call and selling the put if the put premium is too high relative to the call’s, and at the same time selling the underlying short to form a hedge, or selling the call and buying the put if the call premium is too high relative to the put’s, and at the same time taking a long position in the underlying.
Using Overpriced Implosion and Underpriced Explosion
Even if you are not interested in hedging or
spreading options, you can still put the Overpriced
Implosion and Underpriced Explosion Lists to good
use.
Calendar Spreads and Volatility
Some of today’s underpriced calls are underpriced because the underlying has been so volatile over the last 100 days.