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Technology Stocks : Creative Labs (CREAF)

CREAF 0.510

+24.0%

11:09 AM EST

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To: Power ranger who wrote (9239)	1/30/1998 12:53:00 PM
From: Douglas Webb	Read Replies (1) of 13925

At the start of yesterday market when creaf was at 17 5/8, the July 25 calls was at 1 15/16 / 2 3/16. Just checked the option again today, with creaf trading at 19, July 25 drops to 1 13/16 / 2 1/16. Any comments? A bullish sign??? Actually, that sounds a bit bearish. I've been writing covered calls since last May, and as it happens I wrote the Mar 20 calls this morning on my Creaf holdings for $1 3/8. The stock price rose over $1, but the Jul 25 call stayed about the same (a 1/8 drop isn't terribly significant.) If the stock volatility had stayed the same, the Jul 25 should have gone up by around $0.40. Since it didn't, the stock volatility must have dropped. I beleive that's often an early warning sign of a trend reversal. (The recent $1/day growth increased the volatility; if the volatility is dropping that's because the market doesn't expect the growth to continue.) A trend reversal would be a good thing for us both right now. Once you write a covered call, you 'change sides', so to speak. A drop to the $17 area would let us buy these calls back for a fraction of what we sold them for, so we can write calls again on the next wave. Doug.

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