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Biotech / Medical : AMLN (DIABETES DRUGS) -- Ignore unavailable to you. Want to Upgrade?

To: Edward Boghosian who wrote (1545)	12/20/1998 8:48:00 PM
From: Toby Zidle	Read Replies (2) \| Respond to of 2173

The most direct answer to your question, Ed, is 'yes, there is a possibility the stock will go higher.' But the most correct answer (though less direct) is more complicated. Here's the basis I view it on: reward/risk. The closing price Friday on AMLM was 50 cents Asked. If you bought it at Friday's close, you can't possibly lose more than 50 cents a share. On the other hand, AMLN can get favorable test results, a new sponsor, a buyout, a new drug announcement, even just a bottoming out and reversal of the price trend. What's your upside target? $2-$3 in a year? What are your odds? 25 percent? (0.25 * 2) + (0.75 * 0) = 50 cents. A wash. (0.25 * 3) + (0.75 * 0) = 75 cents. A Buy with 50% appreciation. Even if it takes 12 months to get there, it makes a very nice annual return. But you have to put in your own numbers to see if buying this stock makes sense for you. You can make this even more complicated. Do you think AMLN is at a bottom? (Probably not.) So why buy now? Wait a few days, buy cheaper, and improve your ultimate return. Of course, if you miss bottom as most of us do, you mess up your potential return a bit. What risk are you comfortable with? To me, AMLN is not an investment now. But it is a very interesting speculation. How many times have you bought call options, Ed, for $1 or more -- and then they expire within a few weeks worthless? I see AMLN as option-equivalent, but without an expiration (unless the company goes bust - figure this into your risk analysis). In other words, Ed, buy AMLN with your options money and sit on it patiently until you get the reward you had wanted. Yes, there's a small, finite chance the company will go broke. But certainly with less risk than the downside of any options play.