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Technology Stocks : Jabil Circuit (JBL) -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (4432)	8/5/1998 5:03:00 PM
From: Asymmetric	Respond to of 6317

Sam, Very True! <If the market and the ECMs tank over the next few months, the premium on the option will shrink. JBL could be at 33 next Nov, but the March 35 option might only be at 4 or 5 due to the eroding time value on the option. I think you'll probably make money, but its trickier than it looks on the face of it.> To me, the whole key is the $36 breakeven price. I think that is probably also the key to buying an option. My thoughts are, just as fundamentals underlies the (eventual) price of a stock, so will these same fundamentals provide some semblance of value to the options themselves. With the stock at 30 1/2, I would not be too eager to take delivery of the stock with an out of the money option priced with strike price of $40 or above (or even at $35 after having factored in my option premium costs). Also at that price, Jabil approaches fair value in my opinion based on recent trading history. What I'm trying to say is that even if my options were to expire worthless, I would still feel pretty comfortable about exercising them and holding stock at an effective cost of $36. I could also actually offset my option costs by selling an offsetting option at a higher strike price. And if I can repeat the process more than once, I may actually end up offsetting a pretty significant cost of my initial position...ie if I can sell offsetting out of the money options at 1/2 to 3/4 (and providing they expire worthless), then I can offset anywhere from 10% to 30% of the cost of the option position I've just undertaken. Of course brokerage fees haven't been included but obviously cut into any gain and add to any loss. Cheers. Peter.