Ibexx,
I just read on the Yahoo Microsoft thread , someone bought 100 shares of Microsoft back in 92 at the price of $92, and today he has 800 shares, and after the coming split he will have 1600 shars; well not bad , but he is stupid. With his cost of $9200
for 100 shares back in 1992, he may bought 4 contract of , say year 1994 strick price $140 leaps, which is well out of money at that time and the premium is very low. Microsoft seemed to be splited every on and a half year at that time , so in 1994 when his four contract expired, the stock price may hit $230, so he can sell 2 contracts at the day of expiration with a total cash of $(230 -92) * 200 = $27600, and use that cash ( after tax) to exercise the rest of the 200 shares at the expiration date , which needed ($92 * 200) $18400 . and today after all these splits , he will have 1600 shares before the coming split , and after the split of this Jan , he will have
3200 shares , instead of 1600 shares. Then he can sell another 600 shares , and use the cash to buy year 2000 $200 leap, and sell half of the leaps , use the cash to exercise the rest of 300 shares . By doing so , he just keep increase his holding every two years with free money !!!!!!!!!!!!!!!!!!!!!!!!!!!!
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