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Technology Stocks : Intel Corporation (INTC)
INTC 50.59+4.9%Feb 6 9:30 AM EST
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To: Frank Ellis Morris who wrote (9341)1/26/1997 11:49:00 AM
From: Richard Forsythe   of 186894
 
Frank/All,

Your comments are perfectly valid, but a buy-and-hold investor who uses margin does have a concern with market movements -- a 25% drop can result in a margin call and/or a forced sale.

To lower the exposure to a large drop in the market, a margin investor needs either to sell INTC and face the dilemma mentioned in earlier posts, or to use options.

Buying out-of-the-money puts gives a fixed downside cost (and the price is paid mostly when you're making money on Intel stock), with unlimited upside in the event of a severe market collapse. Hedging a margined portfolio, at least in these uncertain times, seems wise if one is to ensure that ones savings are not to be wiped out by a margin call.

Richard
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