Novell, NOVL, I really need some advice Message Board

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Technology Stocks : Novell, NOVL, I really need some advice

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To: Malsi who wrote (27)	7/2/1997 2:54:00 PM
From: Ayman Abukhater	of 46

Malsi, First we have to agree on the following assumptions: - The stock is undervalued - The possibility of turn around. - Time frame for investment is 2 years or less - We are buying 1000 shares. - Assume by then the price is going to be $15. We are dealing with two different strategies: Strategy 1: Buy the stock. At $7. Total Cost is 1000 * 7 = $ 7000. Plus commissions. Your profit is $8000. Strategy 2: Buy the Leap: At $3. Total Cost is 10 Contracts (1000 Shares) = $3000. Plus commissions. you still have $4000 to invest in something else. I would by 20 contarcts instead and leverage the money better. The price of the option increases proportionally. your profit is $7500 plus whatever time premium left. Ayman

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