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

To: taxman who wrote (38762)	2/29/2000 6:13:00 AM
From: Bill Holtzman	Read Replies (1) \| Respond to of 74651

yes but you don't need the $9700 to buy the stock.

To: taxman who wrote (38762)	2/29/2000 9:10:00 AM
From: rudedog	Respond to of 74651

taxman - the reason I would sell the put and buy the call versus the underlying is strictly leverage, and my feeling about whether the underlying will continue up over time. Buying near-term out of the money calls (where the time value is nearly gone) can provide HUGE leverage over buying the underlying. For example, in the first week of November, just before CPQ's 3Q earnings statement, the stock had dropped to about 18. Premiums on the Nov 22.5s was 1/8, and earnings were scheduled a few days before expiration. Earnings were above expectations and the stock went to 25 and change. The calls were worth 3 - a gain of about 25X in three weeks. An investment of $6,250 bought 1000 contracts, yielding $300K 2 weeks later. The same investment in the stock would have bought 350 shares, yielding a little over $9,000, a gain of only about 50% in the same time.