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Technology Stocks : Broadcom (BRCM) -- Ignore unavailable to you. Want to Upgrade?

To: Keith A Walker who wrote (1948)	6/19/1999 10:18:00 PM
From: Keith A Walker	Read Replies (1) \| Respond to of 6531

OK - some real numbers from Friday's close to illustrate the above scenario: (commissions are variable, so not accounted for in this example) Sell a naked July 120 put at the market: 13-7/8, $1387.50 Sell a naked July 125 call at the market: 4-7/8, $487.50 Buy a July 130 call at the market: 3-1/2, ($350.00) Total net to your account: $1525 Now, let's say BRCM settles on 7/16 at $122-3/4: you keep it all and you are not buying the stock. Plus you make more than having been long and borrowing $11,200 for a month. A little worse case, let's say BRCM settles on 7/16 at $133-3/4: you make $1000. Take the $1525 net you had from the total transaction and subtract $500 for covering the naked call, plus $25 for the lost profits above 133.5. Hence, $1525-500-25=1000. Probably covers your margin interest, right? Basically, you've got $1525 to deal with. Until the stock hits 140-1/4, you've got some profits. Anyone care to make sure I got this right? No guarantees.

To: Keith A Walker who wrote (1948)	6/19/1999 11:04:00 PM
From: Bill Holtzman	Read Replies (1) \| Respond to of 6531

Setting up your options position is fairly straightforward. You're willing to buy the stock at 110 so you sell a put, and you want to sell some of the hype so you sell a call but buy a higher priced call "just in case". The hardest part of this comes after you've set up the position. Deciding what to do as the stock gyrates can be difficult. However, if the stock were to plunge immediately you could liquidate your call position with a profit and then wait for the stock to come back to make money on your put. My experience has been, though, that between the bid/asked spreads and the commissions this is a tough cat to skin. Bill