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Strategies & Market Trends : WILL COCA-COLA ALWAYS GO UP?
KO 71.54-0.2%Nov 12 3:59 PM EST
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To: Dulane U. Ponder who wrote (1228)9/4/1998 11:26:00 PM
From: bhg  Read Replies (1) of 1462
 
Hi Dulane U. Ponders,

I am passing this message on for R. Brinks.

I was passing by the the KO thread at SI and came across some of your postings.

From your postings, I understand that you've held shares of KO for a long time and the main dilemma preventing you from selling your position is the Capital Gains Taxes you would incur from an 800% profit. You also seem convinced that KO is destined for a continued correction but again, the Capital Gains Taxes would probably erode more of your capital equity than your expected correction on KO shares.

The strategy I propose is for you to "short" KO using your existing shares as collateral. Basically, you'll borrow shares to sell and when the KO corrects to a more attractive valuation you can buy them back to cover your short position. This strategy lets you take advantage of your expected correction without having to incur Capital Gains Taxes from your original position which has accumulated a gain of 800%. You'll only be taxed on the gains you make from your short position. The beauty of this strategy is that since you already own the stock and KO takes an unlikely leap higher you won't be short squeezed because the collateral KO shares you own will also increase.

(In other words you would have locked in your profit of 800%).

This strategy of shorting instead of selling your original KO shares will ease the tax considerations on your KO trading.

Good Luck!

R. Brinks
(thru bhg)
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