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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Sowbug who wrote (36552)	2/26/1998 8:45:00 PM
From: Land Shark	Respond to of 61433

Your theory works if the strike price is significantly less than the current price and the expiry date is soon. March 35 calls are more expensive, but, have more upside potential in absolute terms. It's much more likely that the March 40 options will expire worthless than the March 35 ones. There still is some upside potential in the March 35 calls, when it seems likely that ASND will be at 40 come expiry. Mind you if the price goes to 45, there would be enormous profit on a % basis if you had bought the March 40 calls at 1/4. This is very speculative. If you play the short term, it's best I think to buy the options that have a strike price close to the current trading range. I tend also to trade them when they are in the money and not when they expire, this reduces the possibility of them expiring worthless (as many say that 90 % of them do).

To: Sowbug who wrote (36552)	2/27/1998 12:19:00 AM
From: Gary Korn	Respond to of 61433

We're in the home stretch for March options, meaning that the option price is going to be little more than its intrinsic value (i.e., amount by which the call option's strike price exceeds the current price of the underlying security). Thus, the delta (amount by which the option price moves for every dollar the stock moves) is very small, too. Things could be worse for you. I own 50 March 45 calls. I was tempted back in the infancy of my option-trading life by their tiny little 3/16 price. Even if Tim's right and ASND hits $40 tomorrow, I bet you they'll go to a bid price of only 1/4. And next week if ASND goes to $42 they may very well stay at $0 1/8. The week after that $44 is USELESS. In other words, it would take a 25% move in Ascend in three weeks for me to make money. That's practically takeover-rumor movement, meaning that the only way I'll profit on these options is if we hit the equivalent of the lottery. Stupid odds. Sowbug, Excellent, well-reasoned and well-stated post! Consistent with what you wrote, Glenn Rudolph often has observed that 80% of call contracts expire worthless. Gary Korn