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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: jopawa who wrote (7271)	9/18/1998 10:18:00 AM
From: MileHigh	Read Replies (2) \| Respond to of 93625

For the most part yes, but lets say RMBS closes at $52 on Oct expiration, they bought the OCT50's for 6.25, they are in the money but they paid 6.25 for the right to exercise, therefore they are in a net losing position, BUT in a SMALL % of situations, they might want to exercise anyway because they like the prospects of the company LT. But most call buyers are speculators and are not USUALLY buying calls to take a longer term position in the company, they are simply trying to make extraordinary profits in a short period of time. SO, in order for the investor to exercise the Oct50 call bought at 6.25, RMBS would need to be above 56.25 in order for them to have a winning position....Could happen, RMBS can move VERY QUICKLY!! MileHigh PS- My opinions only and nothing near precise! Also, most call buyers never actually exercise, they just sell to close, hopefully at a profit...