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Technology Stocks : Ascend Communications (ASND)
ASND 205.50-1.5%Dec 5 3:59 PM EST
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To: James A. Venooker who wrote (56349)10/21/1998 9:58:00 PM
From: ibrandybuck   of 61433
 
I believe he's playing married puts. That's the classic hedge. I was initially confused by his reference to "shorting his shares". He clarified in a subsequent post.

This does not increase risk. He has decreased or eliminated downside risk, at the cost of the put premium.

He will benefit from upside movement almost as much as you or I (reduced by his premium amount). He will now enjoy significant offsetting benefit from downside movements as well, on the put options (function of premium paid, time period, and strike price). If he's right, and there is a short-term pullback, he may have an opportunity to exit his put position at a profit and revert to a standard long stock position. He has suggested this is his intention.

Actually shorting his shares would have been a more complicated and expensive game. That would be little more than a timing game and/or a tax game, since his real position would actually have been neutral.
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