David,
What LoD did was to guarantee that he kept his stock for the long-term capital gains purposes, and for the long-term appreciation which he foresees. However, he looked at the market and believed that the market forces are currently extremely weak, so that the market would probably decline sharply, dragging DELL with it. Consequently, to take advantage of short-term market gyrations, he sold short against the box. In no way does this action change his opinion of the stock's potential... Actually, because he chose an avenue to keep his stock, it underlines his long-term view. A very savvy move, IMO.
Effectively, it shows a short-term market bearishness, and a long-term DELL bullishness. He...
1) keeps his DELL for further appreciation at long-term Cap Gain rates
2) makes some additional pocket change by taking advantage of a short term market turn-down--on which he will pay the short-term Cap Gain tax.
Regards, 3. |
