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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: joe who wrote (17134)	6/9/1998 2:07:00 AM
From: Stockman_77079	Read Replies (1) \| Respond to of 45548

Hey Joe, it was hard for me to understand your note, but I will try to take a shot at explaining the more expensive put option someone bought on the latter part of your note. The October option is months away, it has more time between now and then to fluctuate in stock pricing, and therefore is more expensive than the options that are closer to expire. I don't have the latest option table. But if you look at the latest table, the July option for the same put would be much less. It's the time value of money, that's all it is. Whoever bought that option must not be very sure if the stock will tank further any time soon, that's why he/she went with the October put option. You have also mentioned in another note about preannouncement. It seems to me that you were saying that it may be safer because we are getting closer to the earning's date. If I were you, I would not count on that. 3COM is not obligated to provide any preannouncement if they don't want to. It's more of a courtesy than anything. Especially the types of guidance they have provided WallStreet, I would not be surprised at anything. I sure hope that the stock action of late is continuing. Even though I am a long term COMS guy, it still hurts when I check my portfolio once a month when I receive my monthly statement. regards,

To: joe who wrote (17134)	6/9/1998 2:43:00 AM
From: chenys	Read Replies (3) \| Respond to of 45548

I'll say a few words since none have so far. First, option activities can be deceiving if you don't piece together all call and put buyers or sellers in the right perspective --you could either be very right or very wrong. For example, if these 2100 contracts were bought at 1/8, then the buyers bet $26,250 that the price of COMS before June expiration would be at least 32 1/2 + 1/8 = 32 5/8, beyond which they make profits point to point. If COMS has news and hits 62 5/8 (which is very likely! ;-) ), then these wise guys would be $30x2100x100 = $6.3M richer. Even if there was no seller the MM'd have to absorb them by selling all the calls (most likely naked) to you and then lose 6.3M if they don't somehow buy them from someone else at some point (if having difficult finding sellers at 1/8, they can always raise the price to attract sellers). On the contrary, if these 2100 calls were sold at 1/8 by some sellers, then they bet it won't get to 32.5 before 6/19/98 for sure and before THQFZ goes worthless they would just take whatever they could. We can search all jewelers to see if anybody had bought a $26,250 engagement ring in the next few days. Certainly, we can also search all pawn shops to see if anyone recently pawned a ring for that much. There may be some gamblers willing to buy and sell at 1/8, and the MMs don't care about making profits from the spread, then it could be 1050 bought to open and 1050 sell to close. We should look at the open interests in the next 3 days to see if they jump up 2100 contracts all of a sudden to 6700 level. (4657 contracts as of last Fri) If not, then the 1050/1050 scenario is correct. As for the Oct 22.5 puts (THQVX), they could be betting that coms would never fall below 22.5 at Oct. expiration and thus sold naked puts, as they would expire worthless if the coms stock price stays above 22.5. But if those were puts bought, then maybe coms will tank to well below 22.5. Whether these were done by hedge fund managers or not, the bottom line is that one needs to know whether those transactions were buys or sells and when all happened. "In short", I tend to believe that we should expect 35 next week.