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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector
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To: rich evans who wrote (1034)12/29/1997 12:55:00 PM
From: Douglas Ulmer  Read Replies (1) of 2542
 
Off topic --- puts and calls:

Rich, you've mentioned twice the strategy of buying the call and selling the put with the same strike price and expiration date. As you know, this gives you the same exposure as buying the stock. It seems to me that the net cost should be roughly equal to the margin interest on the underlying stock out to the expiration date. So, you could get the same bang for your buck by just buying the stock on margin. But the option strategy has the disadvantage of ensuring that you'll have a tax event (hopefully a taxable profit!) at expiry. Am I right about the cost? What is the margin requirement to sell the put? Am I missing some other offsetting advantage of the option strategy? Thanks,

Doug Ulmer
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