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Technology Stocks : NCDI - Network Computing Devices
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To: J.S. who wrote (4195)6/15/1999 6:48:00 PM
From: Jim Henke  Read Replies (2) of 4453
 
Joe,

I read that June 17 date on Yahoo as well. For all I know, they could have been misquoting me. The reason I predicted June 18 has nothing to do with events on the horizon...which I am not in the least bit privy to. No. The reason I have a hunch about the 18th is because it is options expiration date. But it's also based on the assumption that NCD talked a good game at the Paine Webber Tech Conference last week. This is pure speculation.

Here's the scenario. Bob Gilbertson reports (at the conf) that ThinSTAR sales are ramping up nicely as expected. The stock is selling about $1.50 above book. PW wants to accumulate more. They wait a week until options expiration so that the time premium on the options is at a minimum. It's a day before expiration and the stock is at $4 3/4. How much is a $5 call worth? Practically nothing. They buy a bunch of $5 calls, then kick in a buy program on the stock. Throughout the day, a million shares trade and the stock moves to seven. They end up paying a premium for the stock, but it is well offset by the gains on the options which they sell off for full value at the end of the buy program. A couple years ago, I saw NCDI make a dramatic move on the Jan(?) expiration date. And last month I saw it happen on MACR. It *could* happen again.

Of course I've also read an explanation of why stock prices tend to gravitate toward strike prices on/near expiration. I won't try to explain it, but it's basically an arbitrage situation.
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