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Technology Stocks : How high will Microsoft fly?
MSFT 492.47+1.2%12:46 PM EST
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To: t2 who wrote (18143)3/18/1999 1:10:00 PM
From: johnd  Read Replies (2) of 74651
 
Someone talked about having a position in 160/220 Leap
call spread. This position has good potential of producing
solid return.

However there is risk. The risk is that Y2K worries dogging
the overall market and the potential rush to cash by the end
of the year (may be Oct - Dec 99). Should severe decline occur,
MSFT will get down to 45 - 50 PE range. That would make the
stock trade at 3.30 * (45 - 50 PE) OR 145 to 160 range.
For the 160 option holder there could be a premium wipeout
and 100% investment loss. The probability of the risk event
occuring, while less than 50% is not too small either. Probably
about 30% chance.

johnd
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