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Technology Stocks : MRV Communications (MRVC) opinions?
MRVC 9.975-0.1%Aug 15 5:00 PM EST
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To: Phil Rosten who wrote (9707)7/30/1998 10:21:00 AM
From: Seth Leyton  Read Replies (1) of 42804
 
No. Unlike an individual, institutions participate in the interest paid for being short. Let's say i'm a fund and I short 1mm dollars worth of stock. I now have money in the bank, right. It doesn't sit there it earns brokers call. Therefore I'm getting paid over 6% to be short the stock. If the stock price falls the bonds earn 5%, the short stock earns broker's call, let's for argument sake say 6%, and I'm now making money off the short position. If the stock goes up I have the conversion, the bond interest, the short interest. If the stock stands still...best of all worlds...I get the bond interest and the short stock interest. And I never have to convert. Remember, 5% is below market for a junk bond. It's an arbitrage. Options COST money, expire and must be renewed. Why buy an option when you can get paid to be short and have the same protection.
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