Novell (NOVL) dirt cheap, good buy? Message Board

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Technology Stocks : Novell (NOVL) dirt cheap, good buy?

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To: dwight vickers who wrote (6214)	12/26/1996 3:57:00 PM
From: E_K_S	of 42771

Dwight - I got to go with the double bottom pattern with the kicker of lower volume this time! I really do not think there is any price manipulation and that there are just more 'large' sellers than buyers. This figures as many of the money managers have had very poor results with this security. Compound this with the overall performance of the market in the last two years, no money manager would want this dog to appear in their portfolio. I guess my only explaination for those $10 put sales is that it must have been done by some very large fund manager who has been selling his holdings over the last few weeks. The objective is to get this dog out of his portfolio and hedge his bet by selling Put's to open (with a small preminum) so he can be back in the stock by the 2nd quarter 1997 by having the stock Put to him. Now if the stock exceeds $10 by May 1997, the fund manager nets $1 3/8 which he can show as a gain in the 2nd quarter performance numbers. This move is actually smart as it allows the fund manager to achieve three specific objectives (1) Get the stock out of his 4th quarter portfolio for 1996 and off set any loss with the huge gains from other securities obtained during 1996, (2) Place a hedge position to own the stock in May if a lower low from the five year low is reached, hence he now becomes an agressive buyer and (3) establish a back-up 'guaranteed' return position if the stock suddenly moves above $10 which will be reported as income to the fund for 2nd quarter 1996. (ie. selling time preminum) With the market so high, we are bound to have a correction in the market BEFORE May 1996. So I see this trade as a confirmation that we are quite near our lows and fund managers would be screaming to buy this company below $10 (as evidenced by this large put sale). Who was the buyer of these put's and if it was a MM how did he hedge this trade (to me this is the real question). Perhaps the MM offset some of the risk with closer in the month puts or established a straddle position with some of those January 10 Calls which also have a huge open interest. EKS P.S. Did anybody see that 'former' CEO Frankenberg was elected to the board of Caer Corporation (in Los Gatos, CA) today. This company produces OCR scanning software. I sure would like Frankenberg back but I guess it's water under the bridge now.

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