Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (18648)	7/22/1998 10:45:00 AM
From: orkrious	Read Replies (2) \| Respond to of 25960

Zeev, theoretically, your argument makes sense to me. Sometimes, though, intuitively, it is hard to accept. Your point is well taken. Jay

To: Zeev Hed who wrote (18648)	7/22/1998 3:07:00 PM
From: Berk	Respond to of 25960

Zeev, I agree with what you are saying and the transaction may be "closed" but it could be even more complex and therefore uncertain. Since the convertible has an implied warrant within it and as the stock goes down in price the warrant loses its share valuation, the arbitrageur would then require less short shares as an offset to the convert, in other words they cover part of the short sale on the way down to stay properly hedged. Then, what we don't know and haven't considered is if the converts are being used by an option market maker (or someone else) who is using them as an offset to long or short calls or puts and consequently is using the derivative market as a hedge and isn't even in the underlying equity, long or short. Then to further confuse the issue the derivative offset could be changing daily depending upon the implied volatility relative to the underlying.