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Technology Stocks : General Instrument Corp.'98 (GIC)
GIC 31.40-0.8%Jan 16 9:30 AM EST
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To: matt gray who wrote (220)4/2/1998 9:27:00 AM
From: John F. Dowd  Read Replies (2) of 615
 
Dear Mat:

I use Pacific/Dreyfus that screen will not disappear today although that montage is not available during trading hours except to account holders. Thanks for calling our attention to this.

What is even more interesting is that the April Calls went down in price while the May calls went up in price during an up day on the underlying stock. I can't quite figure out who has the better understanding the investor or the market maker. If this is such a hot idea why did the Apr price go down?

The explanation might be that this open Apr. position is actually a short position. Let us say this investor owns 480,000 shares and they want to hedge their position so they sell 17.5 calls locking in an exit at 20.75 or thereabouts. Then they go out and buy a call at 17.5 in may from the proceeds from the call sold in Apr. Now say the stock goes to 25 because of great news they are taken out at 20.75 but still have the May calls which go up more because they have a time premium. If the stock takes a dump they are out and they are exposed only to the extent of their investment in the May long position.

We might infer from this that there is a big event about to take place and this shareholder leans towards it being negative and therefore wants to exit with the least fuss but leave the door open to get back in.

I am pretty sure the open interest can be either long or short. If anyone else has a thought on this please put in your 2 cents worth.

Regards,

John Dowd
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