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Technology Stocks : Dell Technologies Inc.
DELL 138.80-2.7%3:59 PM EST
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To: TechMkt who wrote (94961)2/4/1999 11:40:00 PM
From: Sig  Read Replies (1) of 176387
 
<<<Anyone have advice on exercising optios?>>>(Feb 80's)
Just a couple of comments.
1. I verified with two brokers that no taxes would be due on the option profits until the stock you acquired thru the exercise is sold ( way in the future I hope).
2. The exercise can be done fast ( a few minutes)
3. If Dell does as some expect and go up before Feb 19, then the % return on the money left in the options will be much greater then if
put into the stock. If the call is now worth $23 1/2 and the stock is 120 on Feb 19, the call is then worth $40. So you have high return on the $2350 ( about $1650)
If you had that same $2350 invested in Dell stock (say 22 shares), then you would have a return of about $396 by Feb 19.
If Dell is at ~$105 on options expiration you would get
back ( or still have ) the $2350 in the option but would pay taxes on the profits you have already. At a lower price you would start to lose on the investment.
So if you think Dell will get to maybe 110 or higher, it would be advantageous to keep the option.
If you plan to take money out of the piggy bank ( about
$8000) which it costs to exercise the option, and put that in Dell also, then the return % may not be as great but you have lot more invested.
BUT you would not stand to lose the whole thing as might happen with the option if the stock were at $80 on Feb 19.
Being long on Dell stock, I can afford the (very real)risk of losing money on options in exchange for possible higher % gains. So I have kept the Feb 80 calls.
Regards
Sig
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