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Technology Stocks : TLAB info? -- Ignore unavailable to you. Want to Upgrade?

To: ArnieC who wrote (6031)	9/16/1999 1:23:00 PM
From: Just_Observing	Read Replies (3) \| Respond to of 7342

Weakness in TLAB may be related to options expiration for Sept. I have been puzzled by the weakness in TLAB stock and here is a plausible explanation for this behavior based on options. If you take a look at the Sept calls for TLAB, you have strikes ranging all the way from 32 1/2 ( The Oct calls do not have anything lower than 50). There is substantial open interest in many of the calls of the 30s and 40s strike. Assuming that the public is long these calls (and the market makers are short), when Joe Public sells his calls for a profit, the market makers buy the calls back and sell the stock that they are long (market makers are always hedged). This causes considerable selling pressure. My calculation show that at least 600,000 shares of TLAB will be sold if the stock closes this week slightly above 55 and below 57.5. This number is obtained by summing up all the call OI up from 32.5 and subtracting all the put OI down from 80 to 55. Given that longer term Cisco may be competing with Tellabs, some TLAB holders are bailing out on the selling engendered by options expiration, thinking that it is related to fundamental issues when in reality it is only related to short term technical issues. Once we pass the options expiration, we shall revert to a more normal behavior. Since TLAB is somewhat oversold now, IMHO, I think we shall rally nicely as we work through the option-related selling and go into next week. In any case, if this theory is correct, TLAB should rally nicely in the next few days. Please note that this just a theory. Any comments, pro or con, are welcome. I am long TLAB so my bias should be clear.