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Technology Stocks : IFLY - travel sales on the web pure play -- Ignore unavailable to you. Want to Upgrade?

To: Secret_Agent_Man who wrote (64)	4/9/1998 7:40:00 PM
From: Rajiv	Read Replies (3) \| Respond to of 4761

Byron, Any other derivation is incorrect from a purely mathematical standpoint. Your derivation has serious flaws. Let me ask you a question - if IFLY goes below $6.25 and stays below it (say x.xx where x.xx < 6.25) will the warrants still be worth x.xx/10*3.75? Think about it and you will find the flaw in your math. Regards. Rajiv

To: Secret_Agent_Man who wrote (64)	4/9/1998 7:45:00 PM
From: Secret_Agent_Man	Read Replies (1) \| Respond to of 4761

Just in case you folks saw my last post and think that I am lewy, well to an extent you are right but, I like my math better. I understand the business of premiums but, the Maximum can also apply when making calculations, rather than using the "premium" over the exercise price is perhaps the more common of the two. However there are instances where the warrants can appreciate above the strike price particularily if they are not called and the commons contu=inue to rise, understanding that the benefit to the company to call the warrants could be very lucrative as well. so I think at the current pace of the internet as a sector as a whole would tend to favor the warrants reaching "maximum" value of $3.75 and perhaps if not called for whatever reason, going beyond that value if not called immediately. Byron

To: Secret_Agent_Man who wrote (64)	4/9/1998 7:56:00 PM
From: henry jakala	Read Replies (1) \| Respond to of 4761

wouldn't the appropriate valuation for the warrants be better calculated using Black-Scholes ? after all it is essentially a long term option however - since it is already in the money and likely to be called rather soon the MMs seem to have discounted most of the time value associated it

To: Secret_Agent_Man who wrote (64)	4/9/1998 8:20:00 PM
From: Sverre Schriwer	Read Replies (5) \| Respond to of 4761

I feel the need to add some information regarding IFLYW. The warrants have an exercise price of 150% the IPO price of the stock ($5) which makes it $7.50 - NOT $6.25! They can be exercised at any time until 2003. They are redeemable by the company 30 days after IFLY has closed above $10 for seven consecutive trading days. (at 5 cents, so you better sell or exercise in time). Warrant valuation. ----------------- The very detailed calculations of IFLYW value in the last few posts are based on the idea that apart from other considerations the value of a warrant equals the stock price minus warrant price & strike price. The valuation of warrants, options and other derivatives are actually much more complex. In most cases the derivative is valued at a premium to the basic calculation above. The premium depends on several factors, mainly the time to expiration and the volatility of the underlying stock. Look at it this way: At close today buying 1000 IFLYW costs you $1032.25. 1000 IFLY would cost you $6968.75. Since the warrants follow (or should follow :-)) the stock price closely once they are in the money, this gives you the same potential upside at a $5 1/2K discount! The drawback is the expiration date, which in this case is in 2003 (no problem), and the fact that once the $10 limit is reached you have to sell or exercise because of the redemption clause. The true basis for valuing the warrants is that for a buck you'll be able to cash in a minimum of $2.50 if IFLY hits $10 anytime in the next 4 1/2 years. At the rate IFLY has been going, with the current Internet craze and considering the low float (only 1.3M of 7.69M outstanding acc. to Yahoo) the odds seem to favor this occuring in a timeframe of weeks rather than years. Judging the risk/reward of derivatives is alway a matter of personal judgement, but I bought quite a few of the warrants today as I consider them a real baragain. If IFLY gaps up on monday I will be proven right - if not I can wait a few months if need be. /Sverre