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Technology Stocks : PairGain Technologies

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To: Jay Mowery who wrote (20834)	2/22/1998 2:56:00 AM
From: PiedPiper	Read Replies (2) of 36349

Hi Jay!! I don't want to rain on your parade but PUT selling is very dangerous at specific times in the market/stock cycle. Both of these cycles exist right now. The market is at all time highs in many valuations and in specific numbers as of Friday (not NaZ). With a potential catalyst for a pitfall (Iraq), a calamitous day can occur rather logically near term. The other possibility regards earnings surprises which often occur during slower sales periods for specific companies, e.g. telecom or other eqmt makers in Q1, a natural slowdown based upon procurement cycles.. Since we have basically passed last years' earnings reports and now should look at the first quarter, we must be on the lookout for a potential warning about the coming year (CIEN immed. comes to mind). Naturally , not all companies come to the same conclusions at the same time and I am not anticipating PAIR to do so since I like these guys. Shorting highly leveraged options during these times can be scary should the stock crater. Selling PUTs implies understanding the risk of failure not the potential for gain, just as buying calls implies the understanding of the probabilities of losing not the potential for gain. I am reminded of 1987 for I do not know if you have experienced it, I will not try to preach upon the fact that Put selling became the rage back then over selling calls. I do not recall what triggered the trading public to move that way other than merger mania and excessive PEs plus the ever rising market. Now we have the second but only a little of the first and third reasons, so we should not be as alarmed right? Well, Saddammit --No! The individual stock risk is SEASONALLY risky becuz any potential shortfall anticipated in the next 6 months will be reported near term. That fact is commonplace in the industry (The CLean Slate Syndrome). Thus just your basic call buyiing is a better risk strategy for now over selling puts -- if your bulllish. Now we reach the crux of the problem,bullish or bearish? Can anyone say that they are bearish and explain please? I'm into TA and I like this one for at least the next 6 mos. for a good 50 % so I would love to hear the flip side?

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