You are correct in your comment that it is difficult to predict when the volitility of the market will remain low. I do attempt to predict "probable" reductions in volitility of an individual Large Cap stock based around fundamental items, such as market reporting, dividend impact etc, but wouldn't recommend it. You are also correct that the risk was higher when when RIO Puts were paying more. I think this would be obvious. My key point is that based on market fundamentals (Share price being a multiple of estimated future P.E. etc) I saw RIO as undervalued at $28 and therefore likely to bounce. Without meaning to offend, I found the article from Geffa as entertaining but a long way from my investment strategy. I could liken it to buying lottery tickets "because statistically 1 of the tickets will win". The quants (Quantative analysts) are generally used the other way around, working out the risk and charging the premium to the speculators (such as our Lebanese hero) to buy the oppies. The entire insurance industry is based on this (excepts the quants are called actuaries) and you are right, they will all lose packets when Tokyo is devistated by an earthquake or similar. I lost a lot of money when AMP dropped from 8.72 to 5.50 overnight (a minor disaster to me), but the other profits from winning on a Daily basis covered it. Potentially I will be poor very soon and I would never advise someone to invest in ETO's, but I enjoy it!
