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

To: FR1 who wrote (23928)	4/5/1998 7:27:00 AM
From: Mike Gordon	Read Replies (1) \| Respond to of 97611

<<Many people are saying that the best time to buy is probably just before or at options expiration (April 16-17). > Franz: Purchase of CPQ via options is smart but sometimes difficult. Your assessment is correct about how management views options in relation to news or corporate purchase. However, I'd like you to consider other factors as is uniquely applies to CPQ. 1. Except for extremely important news, the stock price will tend to stay near a primary strike price. For instance, I would identify $25 as the primary strike price for April. 2. We have 9 trading days left, I would watch for that extremely important news. CPQ is due to announce earnings on the 15th. My concern, will there be any positive or negative surprises? If positive, such as being able to squeeze just a little earnings, than the stock could move 1.25+ depending on the magnitude of the announcement. 3. The shareholders meeting is the following week. Pfiffer, being proud German, will probably have other positive announcements concern both CPQ and DEC, This information could get into fund managers hands prior to options 'x' date. This too could influence the price. In summary, shorting (selling) the April 25 (.50) or May 25 puts ($1.25) to buy the stock will probably result in you keeping the premium only Of course, May being 6 weeks away, might see CPQ at a new level of 27.5 or better yet 30 in terms of near term options. Another approach would be to sell the April 27.5 puts at $2. If CPQ stays under this 27.5 between now and the 17th, you'll be the proud owner of CPQ at the net price of $25.5. However, this kind of thinking made me the proud owner of 2K CPQ. The market could tank, earnings be worst than anticipated, etc., which will lead CPQ lower. Many members of SI would complain to the webmistress and demand that I leave the thread. <ggg> Good luck next week, Mike