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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits"
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To: David Bogdanoff who wrote (337)8/11/1999 3:06:00 PM
From: Terry Maynard  Read Replies (1) of 1185
 
It is my understanding, that the model factors in things like volility of the stock price, interest rates, time to expiration of the option and the difference between the strike price of the option and the price of the underlying stock. However, this model does not allow for the value of the two stocks after the breakup. So, if as we believe that the value of the parts is greater than the whole and the option price is determined by the price of the whole, then the option's theoretical value, as calculated by the model, after the breakup will be greater. Add that to the leverage that options naturally afford an investor. Basically, this is what I mean't. It is strictly my opinion; please do your own due diligance.
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