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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (31505)	8/25/1998 4:46:00 PM
From: PaperChase	Read Replies (2) \| Respond to of 132070

MB. I think you have mentioned before that buying a stock and then writing covered calls against it is a suckers game. And for the most part I agree. However, maybe the bloated premiums on CIEN would cause you to change this view? Here is my view. I conservatively think CIEN will get acquired at a minimum of .75 or .80 to 1 of TLAB with TLAB temporarily falling to $54. This gives CIEN a price of $40.5 to $43/share. CIEN Sept $35 Calls are trading at $4.75 - $5. And with that premium and very short term to expiration, the most one could make is $3/share using my above assumptions. (My calculations: $3/share = $8 intrinsic value of Sept $35 call - $5 cost of the Call contract. I assume time value will be zero since we won't get an answer until just before expiration.) So wouldn't buying the shares and selling covered calls make more money under this scenario? I feel confident about the acquisition ratio but one never knows where TLAB will trade after the new ratio is announced. I chose a lower estimate of $54 for TLAB because the terms of the deal will be wrapping up in the middle of earnings warning season for the overall market. What do you think?