CYRIX / NSM Message Board

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Technology Stocks : CYRIX / NSM

NSM 18.27

0.0%

Jul 31 5:00 PM EST

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To: Craig Freeman who wrote (26267)	4/29/1998 8:00:00 PM
From: Craig Freeman	Read Replies (2) of 33344

Are your experienced? Last October, I was looking for a way to hedge against a MAJOR market drop and never quite found one. This time, I have a better idea but I need some help. For example -- WEN (Wendy's, the burger people) have June 20 calls selling for what appears to be a near-zero premium. Let's say I buy a zillion calls and sell a zillion shares short. If the stock rises, the calls are well into the money so they should rise dollar-for-dollar with the stock. But if the stock falls, a premium will be created and then, if the stock falls below 20, a true spread will be created in my favor. Is this not a textbook example of a downside hedge? WEN earned an upgrade today and things may change at the open but have I missed something about the basics of this transaction? ANYONE who has done this kind of trade previously who cares to contribute for the benefit of a "short novice" such as I .. please respond! Craig PS I recently sold all of my Asian holdings (except TSM) and some "index" funds .. so -- at 30% cash -- margin should not be a problem.

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