Intel Warrants? Buy, Sell or Hold? Message Board

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Technology Stocks : Intel Warrants? Buy, Sell or Hold?

INTC 41.50

+5.0%

Oct 28 3:59 PM EDT

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To: Richard Forsythe who wrote (15)	6/3/1996 11:47:00 AM
From: Andrew Chow	of 36

A couple of mistakes - First INTCW is an option (in economic terms). Whatever your rationale for not buying outright options, you need to recognize this. Second your "borrowing rate" when buying INTCW is equal to a little over 6% at this time, although that's still better than you'd get as a retail investor on margin. Your tax treatment of these borrowing costs are however less favorable when buying INTCW than when margining INTC (see my prior posts), particularly if you are intending to hold to maturity as you suggest with your question about avoiding cap gains at maturity. Margining INTCW will give you more exposure than margining INTC. But so will buying out of the money options. However INTCW's implied volatility is now inline with INTC options, so I'd consider INTCW fair value now. Finally w.r.t. cap gains, I believe you can avoid cap gains at maturity since the warrants are Intel-issued rather than cash settle. Note that if you do this however, you will also be indefintely deferring your tax deduction for the embedded borrowing expenses.

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