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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Vegas Kate who wrote (3083)	6/8/1998 2:32:00 PM
From: Hal Rubel	Read Replies (1) \| Respond to of 27311

RE: " I just thought of an idea: 1. buy a block of VLNC at 5 1/2 (# shares = half of goal position) 2. write the Dec 5 covered calls for 1 3/4+ 3. sell equal # of 5 strike puts (ie: the Sept 5 p is bid 11/16) If the stock is called away, you still make 60%+ annualized yield on your moolah. If VLNC tanks below 5, basis is ultimately only ~ $2 5/8 / share. What do you guys think? Are my calculations accurate?" A Possible Fly in the Ointment: Volume is currently so low that acting on your analysis will tend to defeat your goal via the affect you would tend to have on the prices of the instruments you are buying and selling. Your profit margins will decline at both ends. And, on the other hand ... If you wait for volume to increase, you will find that it has increased on some sort of news. The news, good or bad, will give you pause, making an indecisive investor of you, defeating your ability to act at all on your grand plan which was conceived before the news. The only saving grace of your plan is that if you are acting on the release of good news, there are likely to be many other people out there over reacting to the same news. That could work strongly in your favor by temporarily widening your available profit margins on puts and calls. So, I would wait for good news. And that can certainly happen. Though a $1 3/4call sounds low to me for a stock that may be $9-11 in December, sixty percent return on your "Moola" also sounds good, especially if you can arrange not to fall in love with this stock. If you think you can set yourself to be a Gigolo to lovely Miss Valence, then go for it and more power to you. Good Luck. Hal