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Non-Tech : E*Trade (NYSE:ET)

ET 17.01

+2.3%

Nov 14 9:30 AM EST

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To: amic who wrote (5848)	4/9/1999 9:09:00 AM
From: Oeconomicus	Read Replies (1) of 13953

amic & ecomm, re puts as a hedge, the problem is that the premiums are likely to be huge (I haven't looked in a few weeks, but would expect them to have risen sharply as the stock rocketed upward) and hedging for more than a short period can get very expensive. An alternative would be a zero cost collar, buying out of the money puts and paying for them by writing OTM calls. You still have some up and downside potential, but you are locked in within the range of the two strikes. You can't make the collar too tight or the IRS will consider it a constructive sale, but done right a collar allows you to defer the gain and to extend the holding period on the stock. Some brokers can also arrange for you to borrow most of the value of the stock, so you get to eat your cake too. Unfortunately, the only people at E*Trade who would have a clue about this are the execs who may have used collars themselves. You'd have to go to a full service firm or other advisor to get guidance to do it right. ecomm, nice problem to have, eh? Bob

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