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Technology Stocks : Dell Technologies Inc.

DELL 133.75

+2.5%

Dec 16 3:59 PM EST

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To: Venkie who wrote (50493)	7/9/1998 11:57:00 PM
From: Don Martini	Read Replies (1) of 176387

Venkie, consider selling Puts vs buying Calls The August 100 Puts and Calls are both about $8.00. If you buy the Call your break even is $108. The shares must reach $116 for you to match the $8 put premium. If you sell the Put your break even is $92. You have $16 less risk. But you lose the upside potential above the $116 If a Call lets you down you lose it all. If a Put fails you ROLL IT OUT and take in more money. If you roll it out far enough you can drop the strike price, take in more premium and reduce your risk too. You can do this indefinitely! EX: sell November 130 Puts for $36.75 = $3,675 per contract. You have no investment at all. If they're put to you the net cost is $93.25, $13 better than the stock would cost buying the 8/100 Call. You get the money in your account immediately. Never spend a dime. You can sell Puts to finance Calls. EX: I sold the Jan 2000 Dell 110 Puts for $28. Bought Aug 90 Calls for $14. This left a surplus of $14 in the account, plus the calls. I expect Dell to be $130-150 at expiration. Total cash flow at $130: Calls: $40.00 [They were paid for by the put sale] Puts: $14.00 [Unspent money from original sale] I'll still be on the hook for the Puts. Can do two things: Wait it out until they drop to 0 and keep the $14. Use the $14 to close the puts which may cost less than that. If Dell reaches $150 I can close the Puts for $6-$8 in August and find another play, for more premium dollars. I close puts when 2/3 of the premium has been won, and so get to trade a lot in a hot market. Right now I'm short 80 puts, long 30 calls, like to have a 2-to-1 or better ratio as I enjoy using the other guy's money! Venkie, I've been enjoying your enthusiastic posts for a year and particularly admire your loyalty to Michael. My best to you! Don

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