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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits" -- Ignore unavailable to you. Want to Upgrade?

To: Stewart Whitman who wrote (236)	6/7/1998 5:42:00 PM
From: Terry Maynard	Read Replies (2) \| Respond to of 1185

Stew, I haven't seen a thing on their symbols. Hopefully tomorrow OFIS will announce them. I think you are right about the puts. Greenblatt said that he would buy calls sometimes because the value of the call did not take into account the spinoff transaction and the value that it would unlock. The option value is based on the Black-Scholes model which doesn't factor in something like a tender. I tried buying F calls when it spun off Associated. I quadrupled my money in about 6 weeks. However, I was cautious since it was my first time so I only put a small amount and the spinoff happened the week that options expired so that may have had something to do with the increase too. Samonite looks like its worth a small venture IMO for the reasons you point out. And the puts may got to around $11 on the 18th. The CBOE will at some point announce a contract change for SAMC. After that point maybe the action of the option will change. I calculated the theoretical put price for Jun 25 using a volatility of 28. The value was .oo1; however, when I calculated the implied volatility using the option price of $5 5/8, it came out over 300%. Using the implied volatility, the option value when SAMC goes to $13 is $13.16. And for Jun $22.5's ($3.38 cost) the value computes to $10.90. So, it looks like the market is anticipating the drop; however the returns, if SAMC drops to $13.17, could be a double for the Jun 25's and triple for the 22.5's. Do these calculations seem consistent with reality? This looks interesting. I'll think about it some more. What have we missed? Terry