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

To: RANDY DAVIS who wrote (23609)	5/19/1998 10:47:00 PM
From: Joe Pirate	Respond to of 36349

Buying PAIR at $17.25 and selling JUNE 17.5 calls against your shares for $1.00 is not a bad idea. If PAIR is $17.5 or greater by expiration, your max profit is 1.25 per share. If PAIR is less than $17.5 on expiration day, you still keep your shares and you always keep the $1.00 Usually, they don't take away your shares until options expiration because the option contract just keeps changing hands. There is ~5 weeks till options expire so you may miss out a little pop to $19 ?? which would be more profitable, and then you don't have to wait. Pirate

To: RANDY DAVIS who wrote (23609)	5/19/1998 11:01:00 PM
From: michael modeme	Respond to of 36349

Randy, If you have a bit of a mathematical background, there's a nice probablistic way of calculating your return based on a given senario. You can even calculate the maximum return senario given the assumption of a specific stochastic process for the stock. What you do is assume the stock price is equal to exp{ W(t) + A(t)}; where W(t) is a Wiener process and A(t) is a predictable process (measureable to the filtration F(t-1)), then calculate the value of your portfolio given this process, and plug in statistical estimates for the mean increase in the stock and the variability (beta) of the stock. Then you use typical techniques to maximize the senario (solutions to the PDE dS(b,t)/dt = 0). I'm really busy or I'd do the calculations. Good luck. Cheers

To: RANDY DAVIS who wrote (23609)	5/19/1998 11:31:00 PM
From: margin_man	Respond to of 36349

It's not a bad idea if you're not on margin. In any case, it's better to hold PAIR and wait for a pop. More upside than downside at this point. IMO. Good luck, P.

To: RANDY DAVIS who wrote (23609)	5/20/1998 3:25:00 AM
From: ratan lal	Respond to of 36349

Selling covered calls on a stock you feel (believe) will go up before next options expiration is a BAD idea. 1. You give up the potential profit 2. If the stock rises soon as you sell the call, you will hate yourself having to look at all the profit you are losing. You will not be able to sell your stock and you will hesitate to buy back your call at a higher price essentially booking a loss. 3. If the stock drops in price, the drop in the covered call will be only a small % of the drop in stock price. Once again you will hate yourself for having to look at the drop in price of your stock and being helpless in getting out. First you would have to buy back the call before you can act on your stock. Basically, the call becomes a trap, a sort of chain around tour ankles. Whether the price of the stock goes up or down, you will not be able to act till expiration. All you can do is look on helplessly from the sidelines. Is it worth the potential $1.25 that you MAY make in 5-weeks ?? You decide. ratan