Roger's 1997 Short Picks Message Board

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Strategies & Market Trends : Roger's 1997 Short Picks

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To: up3up4 who wrote (7887)	12/5/1997 8:58:00 PM
From: Dan Lisman	Read Replies (3) of 9285

Alex, Not counting commissions, Jan 50 puts have a premium of 9 1/8 based on current price of 56 1/4 and put ask price of 2 7/8 (on expiration day yhoo would have to sell at 47 1/8 just to break even) Jan 60 puts have a premium of 4 1/8 based on current price of 56 1/4 and put ask price of 7 7/8 (on expiration day yhoo would have to sell at 52 1/8 to break even), again not counting commissions. To carry this farther, lets say your choices were to buy either: 2 of the Jan 50 puts at 2 7/8 or 1 Jan 60 put at 7 7/8 If yhoo is selling at 45 on expiration day your 2 jan 50 contracts would be worth about $225 total profit. Or your 1 jan 60 contract would be worth about $700 profit. If yhoo is selling at 40 on expiration day your 2 jan 50 contracts would be worth about $1400 total profit Or your 1 jan 60 contract would be worth about $1200 total profit. Bottom line is that premiums on yhoo puts eat up too much potential profit in BOTH cases. Premiums are set by supply & demand and there is too much demand for these puts. If you really think YHOO is going to be $40 a share by the 3rd friday in January, go for it. Personally, I do not think it will fall that far, and will stay away from it. Dan

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