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Technology Stocks : Bay Networks (BAY)

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To: J O'Keefe who wrote (2150)	11/8/1996 6:09:00 PM
From: Srinivasan V S	of 4270

I would just hold it and make a fortune. But if you want to hedge yourself - Sell Jan 20 Calls. There are about the same price as March 25 Calls If Bay goes down you are OK. If Bay goes up only after Jan you make out like a bandit. If Bay moves up sharply between now and Jan (over $26-27) you are OK because the time value of your March 25 will exceed what you have to pay for the Jan 20 Call. If Bay stays between 22-26 you will loose and I think even in the worstcase your loss will be around 1$. I think the 2 month time value even in the worst case would be around 10-11% the price of BAY if Bay is in the 22-26 range. I am a novice at options - So this was to me an interesting exersice. Hope some experts out there coment on your best move. Srini

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