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Strategies & Market Trends : Value Investing
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To: Michael Burry who wrote (7857)7/26/1999 12:55:00 PM
From: Allen Furlan  Read Replies (1) of 78497
 
Mike for your consideration. My take on cse is that there is a 50/40/10 probability of merger at 55, merger at renegotiated level(say 45) and no merger with stock falling to 30. If one were to sell 3 csemh(jan 40 puts) at 3.5 as alternative to buying 100 shares at 46.5 the expected values would be as follows:
Stock .5*8.5+.4*-1.5+.1*-16.5=2
Puts .5*10.5+.4*10.5+.1*-19.5=7.5
You can put in your own probabilities and determine your own risk characteristics as to leverage but selling puts is an excellent alternative strategy. Also 3 puts only require 1650 cash.
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