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To: Joe E. who wrote (136)	2/8/1999 12:27:00 PM
From: Steve Robinett	Respond to of 419

Joe, You comment,Usually the riskiest end of the equity market are the penny stocks.... And usually penny stocks sell for pennies, indicating that the market has priced them cheap due to high risk. But you're right, at the extremes of the risk/reward scale in the market, risk and reward are mispriced, sometimes due to the distortions introduced by making a market in those securities. You ask, As to the risk of downward movements in stock price being the risk to be most importantly considered in analysis of internet stocks, why not use the implied volatility of LEAP puts at the asked price? As you'll see from this post earlier on this thread, I agree with that notion. The only problem is that not all stocks have LEAPs, especially not all Internet stocks. Message 7631324 Best, --Steve

To: Joe E. who wrote (136)	2/8/1999 12:41:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 419

Joe, I think you are hitting on a point that needs to be emphasized -- the discussion of risk thus far has pretty much assumed risk averse investing (which you point out does not exist in certain market segments) and efficient markets (which I don't believe exists in smaller capitalization and thinly traded issues). But I'd like to come back to the issue of the internet stocks in this connection. If you look at threads like AOL you will find that many investors are momentum guys. I suspect that if you did a careful study of the behavior of such stocks you would come up with the following results: a very high beta (and implied volatility), and a negative alpha. If this is the case does it make sense to buy these stocks and sell out of the money calls against your position? TTFN, CTC