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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Jan Crawley who wrote (51437)	8/3/1998 4:17:00 PM
From: James A. Shankland	Read Replies (3) \| Respond to of 61433

Would you comment on: Writing Aug 45 covered calls for $2 3/8 premium; and write equal # of Aug 45 puts for $3 plus premium for a short-term play? Thanks. This is essentially a bet that ASND won't move "a lot" away from 45 in the next 3 weeks. You win if ASND stays within your total collected premiums ($5+) of 45. Seems a little risky, as ASND is bouncing all over the place right now; on the other hands, the collected premiums are commensurately high (but have changed since you wrote: I show ASND now at 46 13/16, with the 45 call at 3 3/4 and the 45 put at about 1 3/4, for a combined premium of about 5 1/2. So you're ahead as long as ASND stays between 39 1/2 and 50 1/2, and do better the closer ASND stays to 45. I'm a little more bullish, near-term, as I think the near-panic reaction to the SRA acquisition is subsiding. Personally, I'd be more tempted to do the same move at a 50 strike. Combined premium is about 5 3/4, so the "win range" is 44 1/4 to 55 3/4, with the optimum price being 50. I'd be especially tempted to do this if the stock moves up a little more tomorrow -- say, if it hits 48 or 48 1/2. Either way, there's a chance of a large loss if ASND moves way out of the target bracket -- e.g., if it gets bought out for $70 by somebody in the next few weeks, or if ASND suddenly announces massive accounting irregularities, driving the stock to $20 overnight. You can insure against this, and limit your losses, by buying out-of-the-money calls and puts; but this cuts into your profit and narrows your "win" band. No specific recommendation from me, I'm afraid; but I hope I've clarified the issues to consider.