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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Jean M. Gauthier who wrote (26019)	7/14/1999 3:55:00 PM
From: ericneu	Read Replies (1) \| Respond to of 74651

"I bought 4 ZMF 95 Strike 2001 LEAPS on the 7th of April for $ 2300 each. Now I cannot understand that, since I bought them when MSFT was trading "around" $ 95, and with MSFT very close to it too now, that they are "ONLY" worth $ 2050 or so." --- LEAPS will fluctuate based on both the remaining time premium (3 months have passed since you bought them) and the overall sentiment for the stock. In other words, LEAP pricing takes into account where people think the stock will go as well as where it is. - Eric

To: Jean M. Gauthier who wrote (26019)	7/14/1999 4:23:00 PM
From: Teflon	Read Replies (1) \| Respond to of 74651

Jean, I am still catching up, how are things? Did you get an answer yet. I rarely trade LEAPS, and as I've tried to explain to the Group, I will stay away from them until the end of the year. Teflon

To: Jean M. Gauthier who wrote (26019)	7/14/1999 4:46:00 PM
From: PMS Witch	Read Replies (1) \| Respond to of 74651

Leap pricing stuff ... Not only Microsoft On April 7, when you bought your leaps, Microsoft's stock price had appreciated about 6-7 dollars over the previous week. The market, observing the rising price, had priced the option anticipating additional price escalation. Today, although Microsoft is trading at similar price levels as April 7, investors' confidence does not exhibit the same optimism, and reasonably so, since over the last week Microsoft's stock price has only moved 2-3 dollars. Likewise, if Microsoft had been trading in triple digits last week and declined to today's level, you'd see even further erosion in the value of your options. Fortunately, you've until 2001 for the intrinsic value of the option to overtake the speculative value. I'm sure you've taken into account the inherent depreciation of your options over their lifetime and priced this into your investment decision. Welcome fluctuations. If our investments didn't behave in ways that upset us from time to time, they'd be so accurately priced by the market there'd be little opportunity for trading profitably. We use this to our advantage. Cheerios, PW.

To: Jean M. Gauthier who wrote (26019)	7/14/1999 8:08:00 PM
From: taxman	Respond to of 74651

Does this have anything to do with "volatility"...? absolutely. the implied volatility of microsoft options is now down to about 35%--a good time to buy options. in the past it has been as high as 50%. it was approximately 45% in april. to see this on a graph: mrstock.com furthermore over two months have passed which would also decrease the value of an option. regards

To: Jean M. Gauthier who wrote (26019)	7/14/1999 9:10:00 PM
From: t2	Respond to of 74651

Jean, I agree with taxman. it is mostly due to implied volatility but there is a small element in time to expiration. If volatility goes up (or of course the stock going up), they should recover. However, i have not really looked at my leaps holdings--holding 2001 but mostly 2002. I have noticed mine are up but i bought most of mine in the last 2 months and i guess they got averaged out and don't remember what my original purchase prices were. Who knows--if we start hearing rumours of settlement talks with the DOJ, volatility goes up and your leaps go up too. I am actually planning to reduce some my leap holding if we get a big move in the stock.

To: Jean M. Gauthier who wrote (26019)	7/14/1999 11:00:00 PM
From: Dwight E. Karlsen	Read Replies (1) \| Respond to of 74651

Jean, I liked PMSWitch's explanation of option pricing. I've figured out the same things over time through the school of hard knocks. As you stated, "we use this to our advantage", or we should anyway. MSFT options are low volatility compared with the majority of tech stock options, IMO. Another way to look at options pricing is that you are betting against the option MM, who has a trader(s) in the option pits setting the pricing. If the stock moves in a direction different than the MM thinks, in general you win. But when a stock increases (or decreases) more than normal in prior days, premiums increase on both puts and calls. That way the option MM has extra "insurance" due to the fact that nobody really knows where the stock will go near-term (uncertainty). Therefore you reached the right conclusion, the best time to buy is after a period of several days (even better, weeks) of little price movement. The Philly exchange has a great site, which shows how volatile the pricing is, in addition to plain old expensivness, of your options: fast.quote.com type in your stock symbol to get the option chain. Try the different formats.