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Technology Stocks : ADTRAN !?!
ADTN 8.760-1.0%12:14 PM EST
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To: Sam Armstrong who wrote (548)10/9/1997 10:43:00 AM
From: Hank   of 766
 
What makes you so sure they would announce warnings if they knew they were going to come in under? The fact is that even if they come in on the money, it wouldn't justify their current price. The only way the pirce will go up from here is if they BEAT the estimates significantly.

I haven't bought puts because options are not by bag. But, I do follow option trading as a secondary indicator. Since most options expire worthless, it is reasonable to assume that the most heavily traded call options define a reasonable top for that month. Yesterday, the option traffic was heaviest for the Oct 45 calls at a premium of $2+. That means the stock has to trade higher than $47+ in order to for the options to be in the money by the end of the month. Odds are it won't. Hence, I consider the risk of losing more money on my short position at 41 minimal. No reason to take a loss now unless something in the picture dramatically changes between now and the 14th.

I am not certain what the earnings report will be like but I do know that all of the indicators I follow show one thing clearly- the price of this stock is going down. Even the 30 day MA has clearly begun to level off and a drop to the 40-41 level at this point would cause the price to cross it. Not a very promising upside gamble in my book.

Hank
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