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Technology Stocks : Intel Corporation (INTC)
INTC 48.31-0.8%3:59 PM EST
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To: GVTucker who wrote (151350)12/6/2001 3:12:37 PM
From: Elmer  Read Replies (1) of 186894
 
You can't be serious, Elmer. An option to purchase Intel at a fixed price has an economic value. heck, you realize this value often; you sell covered calls on Intel, right?

Sure I sell CCs and Puts as well, but there isn't any expense to anyone until money changes hands. If you are arguing that it is an expense to Intel because they could have sold the option to someone else instead, I could argue that everyone who doesn't sell CCs has an expense for the options they don't sell. That's nonsense.

And that is because options do have value, and by giving them away, Intel is incurring an expense. If there weren't share repurchases, the owners of Intel would incur this expense by dilution. Intel repurchases shares instead, and thus the owners of Intel incur this expense by having less cash on the balance sheet.

Again I don't see how there can be an expense when no money has been expended. Intel is giving options away, not stock. The stock must be paid for so how can you say there is less cash on the balance sheet? The exercise of options results in the selling of shares. Selling shares adds cash, the same amount of cash that was spent buying the same shares that are now being sold. This is a push. If there is any loss it's in the interest lost in holding those boughtback shares for 5 years until the option is exercised. There you can make a case.

EP
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