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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: JB who wrote (39315)	2/14/2000 10:03:00 PM
From: Alski	Read Replies (1) \| Respond to of 45548

JB No, COMS won't be holding PALM shares to cover leap calls, unless they sold the leaps in the first place. A call option is a contract to deliver some property at a fixed price on (or before) some future date. Whoever writes (sells) any call option is contractually obliged to deliver that property if called. If they don't have it to deliver then they have to acquire it on the open market. Alski

To: JB who wrote (39315)	2/15/2000 12:01:00 AM
From: Mang Cheng	Read Replies (1) \| Respond to of 45548

As Alski had replied, if our assumption is right, then the new Palm options will come from the option writers. After the distribution date, the option writers, who had pocketed the premiums, for the duration of the option period, will need to have the Palm shares readied for assignment at a certain price. Right now I still couldn't figure out how to derive the strike price equivalents between coms and palm. It's complicated because we have four prices to consider, coms price at ipo and distribution and Palm price at ipo and distribution. Let say I have 2001 jan $70 calls, by Aug/Sept, if the distribution goes ahead, what striks price will I get for the Palm option portion ? I think they will have to use the ipo price (e.g. the $16) to do the conversions. It shouldn't be based on the Palm price at distribution date as the S1-a claims for the employee options. It looks like that paragraph is wrong or only applies to employee options. Mang