Compaq Message Board - Msg: 3953423

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Technology Stocks : Compaq

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To: Eddie Kim who wrote (23844)	4/3/1998 8:34:00 PM
From: Mike Gordon	Read Replies (3) of 97611

<<You loose all upside potential for CPQ. What if CPQ is trading at $30 come May?>> Eddie Kim: Your point is well taken. Two factors support your argument. 1. Potential for a surprise earnings statement on April 15, and; 2. Positive announcements concerning the future of CPQ and the integration of DEC during April 23 shareholders meeting in Houston. However, I have no assurance of the disposition of CPQ by May 22. Eddie, selling the May 27.5 Covered Call is the same as selling the stock for 28.5 today. I'll risk the $1.50 (30 strike price - 28.50) assuming that CPQ goes to 30 in favor of receiving my gain now. Additionally, I need to question exactly what the gain is. If I purchased CPQ @$26.00, then my gain is $1.50 ($26 to $27.5) plus the $1 for the call. Looks like $25K profit to me for six weeks. And if CPQ never makes it to $27.5, I keep the $10K premium. Arguments can be made that CPQ in fact will be higher then $30 in May. And I think there is a pretty good chance it will, however, I'd rather take my $25K today. JMHO Mike

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