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Technology Stocks : MSFT Internet Explorer vs. NSCP Navigator

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To: Robin who wrote (3243)11/20/1996 5:53:00 PM
From: damniseedemons   of 24154
 
>Remember a year ago you used to tell me buying options is like going to casino and at least in there you get the drink on the house!!!

Uhh, that wasn't me. I love gambling, but I've never used a casino metaphor. It may be possible that I was quoting someone else???

>What ever happened to you, you are now buying options with such a heavy premiums?

When the price of an option is high, that doesn't mean that the premium is! Premium is the difference between: (option price + strike price) - (stock price).

In NSCP's case: (10 1/4 + 50) - (58) = 2 1/4 premium for the January 50 calls. That premium is actually quite low.

Thus, for me to break even, NSCP needs to be 60 1/4 on January 18, 1997. With the stock at 58, that is actually very little premium.
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