Data Broadcasting Corp. (DBCC) Message Board

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Technology Stocks : Data Broadcasting Corp. (DBCC)

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To: moby_dick who wrote (2132)	1/6/1999 6:03:00 PM
From: RockyBalboa	Read Replies (1) of 5102

Hmm. There is a mistake, moby dick. The financial perpetuum mobile has to be invented yet. Consider DBCC at $10 that is way above your $6 breakeven. Then you have (all w/o commissions considered) -18.750 on DBCC (10 - 17.5) +28.750 in premiums (11.5 * 2.5) but you forgot to settle/buy additional 2.500 DBCC @17.5 which U must sell at 10.(You mentioned that you are short @17.50 puts) Thus: -18.750 put settlement (10 -strike 17.50) ======== Totals: DBCC at $10 gives you a -8.750 so far. What is correct that if DBCC was up at 20 (ur unchanged) then you keep the 28.750 from the premiums (gross), delivering DBCC stock. The breakeven must sit at the spot where the premiums doesn't cover 2 x (2500 x [S - 17.50]) which is 11.75 not 6. Which is basically, the loss from the stock you held + the above mentioned ITM value of the short puts. A riskless reversal was: Write Call, buy put, buy stock when the call is too dear relative to the stock/put combo. C.

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