Ascend Communications (ASND) Message Board

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Technology Stocks : Ascend Communications (ASND)

ASND 206.52

-1.2%

3:59 PM EST

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To: Gary Korn who wrote (29220)	1/3/1998 2:06:00 AM
From: James A. Shankland	Read Replies (1) of 61433

Gary, that's exactly the problem with buying protective puts: they expire quickly. Or if they don't, they're too expensive to be worth it. Look at ASND: you could buy a 25 put for 1 1/4 (ca. 5% of the value of your stock), but it expires in two weeks! That is not cheap insurance. For ca. $4, you can buy just under 6 months' worth of insurance (June 25 puts); but that means ASND is going to have to go up at an annual rate of about 34% just to cover the cost of the insurance you're buying. Hey, maybe it will; but it sets the bar pretty high, and chews up lots of potential profit. It's tempting to look back and say, "If I'd bought protective puts back then, I'd have saved a bundle;" but if you really think the stock is going to go down that much, you're better off just selling it outright.

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