How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Maureen who wrote (1130)	3/16/1997 3:29:00 PM
From: Robert Graham	of 14162

Thankyou Maureen. I am not done yet. I am thinking of doing an analysis based on the company's fundamentals. Since this is a company with currently decreasing earnings and a 47% debt to equity ratio, I think an analysis by cashflow would be the best approach to take. This also fits with a short term investment approach since my basic interest is knowing how well financially they will get through thei current problems for the short term. One interesting bit of information that I have come acoss so far is that Insiders own about 30% and Institutions own about 65%. This leaves an effective 5% float (5 million) which explains the "energetic" price action of this stock. The institutions are essentially "stuck" in this stock and will likely wait for an upside in order to act on any planned distribution (selling) of this stock inless the stock substantially dips from here, which is unlikely IMO. The one downside I have come across is the 9 million shares shorted by Dec 1996. This represents about 10% of the stock outstanding, and 200% of my effective float value. Evidentially there are some institutions that were playing in this short strategy. However, the stock went up dramatically from this point in time and came back down. This must of shook alot shorts loose and they probably contributed to the dramatic increase in price when they coverred their shorts. If this is a popular stock to short, that can also be used to explain the aggressice increases (and decreases) in the price of this stock. And the covering of some shorts for profit taking helps firm the stock up at its current value. Any comments or feedback out there?

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