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Technology Stocks : Full Disclosure Trading
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To: Cary Salsberg who wrote (5691)5/30/2003 8:56:09 PM
From: Sam Citron  Read Replies (1) of 13403
 
I am not certain

It is somewhat unusual to hear you express such humility, Cary. <g> In all sincerity, I appreciate the honesty. Why not go down that decision tree with expected probabilities and see where it takes you? I can see that if XLNX goes out the third friday in Jan '05 at a price less than about $37, a LTB&H strategy will yield a higher ROI than the option spread. Add in the LT cap gain advantage of the stock and the crossover point might rise to $40 or so. But that's a far cry from $60. At $60, it's a slam dunk in favor of the option spread, and you should regret your tortise-like reluctance to experiment with the unfamiliar. Nobody is ever certain of anything in this game, especially when the issue of timing is present, but...

As for complexity and research costs, additional analysis would be required if, for example, one were to buy XLNX and sell ALTR. But this is much simpler. I would argue that by reducing the downside risk and the direct cash outlay, it is much easier to execute the strategy to fruition in a year and a half without being psyched out of the position by unforeseen intermediate events. But that is probably not a concern for you as it is for me.

Can you please explain why you consider XLNX to be a "special situation".

Sam
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