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Technology Stocks : TECD - Tech Data
TECD 144.900.0%Jun 30 5:00 PM EST
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To: JOE who wrote (203)9/5/1997 6:00:00 PM
From: Rob S.   of 584
 
I think Tech Data will trend up to around 46-47 near term before any sign of a pull-back. The distributors have come through the perilous summer months looking great and the forecasts for sales of computer and networking gear to small to mid size companies are very positive (Computer Reseller News and TECD and other distys' statements). With the major move toward channel assembly picking up steam, Tech Data should do extremely well over at least the next several months.

I am looking to hold on for a 3-5 day run up and then sell in-the-money calls against my position. The calls are getting a pretty nice premium now and should be much pricier in a few days;

OCT 40s 5 1/4X 5 3/4
OCT 45s 2 5/8X 3
DEC 40s 6 3/4X 7
DEC 45s 4 1/8X 4 1/2

Say you bought more TECD at ~43 1/2 and sold the OCT or DEC 45 calls for 3 or 4 1/2 respectively. If you get called away at 45 in DEC, you will net between 4 1/2 (10%) and 6 (15%). If you bought now and sell after the stock runs to 46 or so, you should get 2-4 more or a 25% to 35% return if called away. If you don't get called out of your position, then the collected premium will lower your cost of the stock by 10%-15%.

There will almost certainly be some revisions upwards in analysts earnings estimates that will hit the wires within the next few days that should help to propel the stock up a notch further. They may also reiterate of put in new buy or strong buy recommendations that will add more fuel to the fire.

Don't spend all your winnings on lottery tickets!
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