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.

Biotech / Medical : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: Biomaven who wrote (1468)	11/20/1998 3:39:00 PM
From: BMcV	Read Replies (1) \| Respond to of 10280

Hi Peter, Thanks for your answer about the options. I've never had any luck trying to figure them out. It just intuitively seemed that they represent a future price, which compared to current price might give some idea of how much risk the market sees in the company's future earnings potential. I think what you're saying is true, that the option price reflects current volatility, but that in turn surely has to do with how certain the market feels about the company's prospects. But it would be impossible to quantify this, I guess. Which discount rate to use on future earnings certainly is a vexing question. I prepared a lot of income analyses for rental properties in the late 80s. I remember seeing my work (done for investors) used with higher discount rates in property tax rebate applications to lower the estimated income and so property value and so real estate tax. In the end, of course, in many cases no income materialized at all, since all our assumptions about occupancy and expected rent increases turned out to be wrong. While sorting through all the prospectuses in the early 90s, after the real estate market had crashed, I remember looking at them with awe that anyone could be so naive to assume that rents would increase 10% annually, the buildings would stay full, the mortgages would be paid off, the owners' equity would double while they were writing big losses off their taxable income... This might be why I take all these estimates with boatloads of salt. Bruce