NEXTEL Message Board - Msg: 3510886

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Technology Stocks : NEXTEL

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To: Ben Wood who wrote (4806)	2/23/1998 8:56:00 PM
From: Bubba	of 10227

To Ben: Sorry if I was confusing. Let me try again. If you own a convertible bond, you own two discrete securities. One-a regular bond. Two-a call option on the common stock of the company. If the stock is at $40 and your conversion price is $60, your call option is out of the money so the embedded call option in the price of the bond is of small value. If the company had regular debt out standing of the same maturity and coupon, it might trade at $80 and your bond might trade at $82. Thus the value of your conversion privilege is $2. Almost all securities have some type of "option" value. STRYPES are just a particular type of convert with some unusual features. The key is to remember that since NXTL is an active issuer of many types of securities, straight debt, warrants and preferreds, there will usually be some large amount of the short interest that is not a "fundamental short" but an "arbitrage short". IOW, the arb shorts don't care if the stock goes up or down as they are perfectly hedged but the fundo shorts want it down big time. HTH Bubba

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