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Technology Stocks : WDC/Sandisk Corporation
WDC 181.08+3.5%Dec 19 9:30 AM EST
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To: Ausdauer who wrote (4338)1/17/1999 12:14:00 PM
From: Daniel Joo  Read Replies (1) of 60323
 
Careful with covered calls. Although it looks attractive enough because of the premiums you receive, it will cost you if the stock goes higher. IMO, the fair valuation of this stock is $24 to $25/share short term. However, if they show potential for even faster growth, look out. The reasons the stock dropped so fast before were many: declining chip prices and demand for their chips did not materialize as fast as most expected (this always happens with new technology - initial excitement about the potential of a company's technology will drive up the stock and then reality sets in when demand doesn't materialize right away - look at the biotech companies in the late 80s and early 90s). This company is unusual for technology companies - they are well managed financially with a strong balance sheet and free cash flow. IMO, covered call writing strategies are wise when a stock is overvalued which SNDK is not. The timing of writing the covered calls is when bad news first starts emerging for a company. None of these hold true for SNDK. We are anticipating great news and their market potential is only now being realized. Again, just my opinion. I'm long on both stock and April 12.5 options that I bought in November with no plans yet to liquidate my positions.
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