Compaq Message Board - Msg: 5399861

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Technology Stocks : Compaq

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To: Jason Hall who wrote (30279)	8/3/1998 8:57:00 PM
From: Mike Fredericks	of 97611

Anyone have any idea why the Jan 2000 $45 are so cheap? At $4 they seem grossly undervalued. Am I looking at the right LEAP here, or what? I think the symbol is .LKPAI The options are only cheap if you think the stock will be higher than $49 in Jan of 2000. I would bet that the options are priced reasonably fairly given Black-Scholes modified slightly because these are American options. No, I don't understand the math behind Black-Scholes, but there are options threads on SI where you can find that stuff out. Think about it though - what's the historical percentage gain of the stock market - 10-12% per year? For CPQ to be at $49 by Jan of 2000, it has to rise over 50% in less than 18 months. I personally think it will, I am long 2 LKPAG's (Jan 2000 $35 call leaps). Hope this helps -Mike

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