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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: codawg who wrote (29985)	9/23/1999 10:57:00 PM
From: J. P.	Respond to of 74651

Ok, well obviously you haven't been trading options as long as I. I've seen this before, just check MCI worldcom about 2 weeks ago. But I hardly ever post on SI anymore because of the surficial level of mediocrity here. So carry on pal.

To: codawg who wrote (29985)	9/26/1999 3:05:00 AM
From: EepOpp	Read Replies (1) \| Respond to of 74651

codawg, i haven't been keeping track but i am assuming that the implied volatility for MSFT has jumped because of the past few days of movement. Maybe it's a good time to short some MSFT OTM options? just wondering... EepOpp

To: codawg who wrote (29985)	10/2/1999 9:36:00 AM
From: J. P.	Read Replies (5) \| Respond to of 74651

Hey snapperhead, remember when I said it was Ballmer behind the big put block that went across (a very profitable trade so far I'd think) and the idea was ridiculed by you, and ignored by the rest of the thread? Message 11347669 The following article from TheStreet.com details the corporate strategy of trading options. Now you'll notice the reply pertains to the SELLING of puts, but in the recent big block you'll notice MSFT bought the puts, and apparantly have profited very well to date since the stock has fallen ever since. And do you really think multibillionaire and president of the most successful company in the history of mankind Steve Ballmer "accidently" panned the market and MSFT stock after the large put block crossed? Did SBallmer really get where he is today by making a rookie blunder like that? Why do I bother even posting this? I don't know, just after a few years on SI sick and tired of reading the usual surficial crap from all these self proclaimed "experts" and thread gurus who don't know their asses from a hole in the ground. And yes, this pertains to a lot of the people I see on Louis Rukheiser and CNBC who control a lot of money and are just fishing and guessing like the rest of us, but will never admit it. Even after serious losses and misjudgements instead of admitting it they go ahead and act the guru on the next round. Check out this article: thestreet.com Why Companies Sometimes Bet Their Stock Price Will Fall By Erin Arvedlund Staff Reporter 10/2/99 12:10 AM ET This week we'll scrutinize the very popular option-selling programs employed by publicly traded companies, such as Microsoft (MSFT:Nasdaq), that involve buying put options on their own stock. Plus, readers sock it to us. TheStreet.com got plenty of pointed email regarding the Sept. 28 story Selloff Leaves Holders of Naked Puts Feeling Undressed asking that we clarify "holders." Did we mean sellers or buyers? We'll tackle that question as well. Meanwhile, keep sending your options questions, with your full name, to optionsforum@thestreet.com. Puts and Corporate Stock Buybacks I must admit I am confused. I own Microsoft -- a lot of it -- and I was shocked to read of the company buying put options, which I thought you buy if you believe a stock will go down, not up. Why not just buy the shares anyway? -- Emanuel Rosen, M.D. Emanuel, It sounds like what you're asking about is Microsoft selling, or "writing," put options as part of what are increasingly popular corporate stock-buyback and option-selling programs. Why do big companies such as Microsoft and Dell (DELL:Nasdaq) sell options just as they're buying back stock? Simple -- to make more money. "Microsoft right now is authorized to do a stock buyback. By selling options, they're trying to optimize their stock buyback in the most profitable way," explains Adam Benowitz, managing director of Apex Capital in Spring House, Pa., a consulting and money-management firm. Before forming his own hedge fund, Benowitz was a floor trader in options on the American and Philadelphia exchanges. Microsoft's option program involves selling puts, which are generally thought of as bets that a stock will fall. In this case, Microsoft doesn't mind if the price falls. When buying back its own stock, the lower the price, the better. By betting that the price will fall, Microsoft makes money selling put options and gets its stock at a bargain (assuming the price actually does fall). "It's maximizing the profitability of the stock buyback," Benowitz says. "Right now, Microsoft trades at around 90," Benowitz explains. "Let's say the stock gets down to 80, the company will be buying the stock at 80. And let's say they sold puts for 8; they're really buying the stock at 72. They either keep all the premium [if the price of the stock doesn't fall] or buy the stock back at a price they want." Overall, Benowitz says, "It's a great strategy. The only way it would backfire is this -- if Microsoft planned to buy the stock back and they didn't follow through. I remember Dell some years ago was playing in currencies; the company said they were hedging, but they were really just speculating. Somebody in the finance department goes nuts, starts playing the market and creates a disaster. But that's not the case here."