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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: Bridge Player who wrote (968)3/2/2004 1:50:54 PM
From: Dan Duchardt  Read Replies (1) of 1064
 
Did you look at the 2005 LEAPS? If the analysts are right, I'd guess a move toward the 30 area will happen in the shorter time frame. The cost of entry is a bit less for the 2005 spread than for the 2006, and then you could do it again the following year.

The problem with closely spaced long term spreads of this sort is that if you get a good price move in the near term, there is no way to bail out early with any significant profit. The price difference between the 2006JAN strike 25 and strike 30 will not change very much if MSFT drifts around between 25 and 30 for a year.

I have no useful opinion about MSFT future prices. There seems to be no way of avoiding paying them periodically for new releases of software, but if someone figures out a way to compete with them based on the quality of products, they could run into some trouble down the road.
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