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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: Poet who wrote (464)	1/1/2000 11:16:00 AM
From: Jill	Read Replies (2) \| Respond to of 8096

Big Questions on Options for New Year with Qualcomm: Rose...ed...taxman...buffalo...stockhawk...anybody: 1) Let's say some of us have a bunch of profitable January calls in QCOM. The impulse would be to exercise as many as possible and avoid taxes. In fact, taxman has said he does so on margin, for that purpose. Then having that many more common shares, one generates more margin capacity. Thus avoid 40% taxes on short term cap gains. 2) However, Voltaire has said this is not necessarily a good strategy with a stock that's ramping up as qcom may still be. Farfel's post a few weeks ago on QCOM noted that if it did half as well next year, one leap for $13K would be worth $290K by 2001. Let's say one could buy $13,000 of QCOM right now--let's say one had previously had one Jan 400 call (I actually don't but the # is a round #) so they are now Jan 100s--four of them instead of one. You could spend $40,000 to get 400 shares of QCOM, which as of yesterday's close are worth about $70,000. If QCOM increases by let's say 600% next year (instead of %1600), then those 400 shares will be worth about $420,000. If you sold those calls--which at close yesterday were worth 77, you would get $30,000. You could buy 30K worth of 2001 or 2002 leaps. If they leverage 3 to 1, as they seem to do, well...perhaps your profit would be substantially greater. However you'd be paying 40% of that 30K in cap gains at the end of the year. Can somebody help me figure out which strategy ends up making more $? 2) Taxman has said you can exercise on a Saturday. How do you do this? Don't most people exercise before end of day on the Friday? Thanx