Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : COMS & the Ghost of USRX w/ other STUFF -- Ignore unavailable to you. Want to Upgrade?

To: David Lawrence who wrote (20406)	3/16/2000 6:42:00 PM
From: Scrapps	Respond to of 22053

You read that stuff...I have to hear it...up close and arsenal.

To: David Lawrence who wrote (20406)	3/16/2000 7:21:00 PM
From: Moonray	Read Replies (1) \| Respond to of 22053

Palm players cautious Hard to borrow status disrupts put-call parity CBS MarketWatch - Last Update: 6:11 PM ET Mar 16, 2000 Palm Inc.'s (PALM: news, msgs) yet-to-be-final divorce from 3Com (COMS: news, msgs) has traders shying away from its newly listed options. Options traders looking at Palm today got a unique peek at how the company's "hard to borrow" status causes a discrepancy in the put-call parity. "Palm's tradable float is only 3 percent," said Ali Saadat, an options lead market maker for Chicago-based LETCO, L.L.C., "which makes the underlying shares next to impossible to borrow, so people are being cautious." Because the Palm shares are hard to borrow, options traders can't hedge their short put or long call positions by selling stock. This causes the puts to be more expensive than the calls, which is unusual. Feeding this anomaly is the fact that Palm is worth more than the company that owns most of its shares, 3Com. Palm traded recently at 55 3/4, which puts its market capitalization at $31.3 billion. Since there are 562 million Palm shares outstanding, 3Com's approximate 95 percent stake in the company is valued at around $29 billion. Yet at 64 1/2 share, 3Com's market capitalization is only $22 billion, or about $9 billion less than its stake in Palm. "If Palm is worth about $56 share and 3Com's stake in Palm is worth about $53 share, then this implies that 3Com should be worth about $80 share, or $20 more," Saadat said. "So you should be buying 3Com instead of Palm." (Assuming the rest of 3Com is worth zero.) This is exactly why traders want to buy 3Com and sell Palm, but they can't. Palm options trade on the February expiration cycle, with initial expiries in April, May, August and November. Opening strike prices are 50, 55, 60, 65 and 70. o~~~ O