Ampex Corp: Digital Storage Message Board

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Technology Stocks : Ampex Corp: Digital Storage

AMPX 8.900

-3.2%

Jan 7 3:59 PM EST

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To: Ramesh who wrote (2416)	3/26/1997 12:52:00 PM
From: Ken Holbert, Jr.	of 3256

Example: Ampex October 7.5 call 1 3/16. This call option gives you the right to buy Ampex at 7.5 per share anytime between now and October 17, 1997. One option contract equals 100 shares. Not 10 shares!!!. You can buy any number of contracts. Although you are paying a premium to buy at 7.5 you have a choice to sell this option before October or excercise this option and purchase the shares at 7.5 Your break even price of this stock will be 8 11/16. But, as the stock nears 8 11/16 your options will be worth a lot more. The premium you are paying for this stock is for the time value of the expiration date. As the expiration date nears the time value premium will be worth less. If you know the stock well enough you can make money. If you don't, you can lose. My advice is to never buy options in a stock you would not own. By the way, right now my break even is 9 1/4. This option with premium is even lower than that.

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