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Technology Stocks : Full Disclosure Trading
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To: advocatedevil who wrote (3274)12/16/2002 11:45:17 AM
From: BWAC  Read Replies (1) of 13403
 
OT Re: What to do with a chunk of cash?

Here is something I have been thinking around. Comments welcome.

Buy something like EDS for example at $19. 3%+ Dividend. Sell Leap Calls deep in the money, one year out, to collect a bit of time premium.

So buy 1000 shares $19 for EDS.
Less $9.80 a share for the 10 Jan '04 Calls sold.
Equal $10,000 at risk.
Still collect the dividend of 3%ish (or $600) on the EDS stock.(assuming it isn't called away and that it could be replaced for $10 commission)
$600 Dividend plus Time premium on Calls of 80 cents ($800)= $1400 total return.

1,400/10,000 cash outlay = 14% effective return with 50% downside protection.

Now go find another 75 similar situated dividend paying stock with Leaps.
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