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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Eric K. who wrote (111583)	5/19/2000 2:19:00 AM
From: Charles R	Respond to of 1572629

<Why short RMBS when you can buy more AMD? > Ah! The words of wisdom!

To: Eric K. who wrote (111583)	5/19/2000 2:24:00 AM
From: Scumbria	Respond to of 1572629

Eric, Why short RMBS when you can buy more AMD? The last time I contemplated shorting RMBS, the stock dropped about 200 points during the next week. I'm guessing that tomorrows drop will be less than 200 points, because that would put RMBS into negative territory ;^) Scumbria

To: Eric K. who wrote (111583)	5/19/2000 2:25:00 AM
From: Eric K.	Respond to of 1572629

Why short (or put) RMBS when you can buy more AMD? Think about your profits in best case scenarios (stocks are priced at fair value): RMBS = $20 Shorting => ($186-$20) / $186 = +89.2% Jan '01 $140 Puts => ($140-$20) / $34.50 = +247% 140.000 .XUYMH 30.125 NA NA 34.500 31.500 34.500 NA Jan '01 $90 Puts => ($90-$20) / $15.13 = +363% 90.000 .ZIXMR 11.250 NA NA 15.125 12.625 15.125 NA AMD = $280 Long => ($280 - $86) / $86 = +226% Jan '01 $120.000 ($280 - $120 - $13.38) / $13.38 = +996% .AKDAD 13.375 NA NA 13.375 13.000 13.375 NA If you consider all possible scenarios and weight probabilities, the expected return on AMD is much higher. Plus, downward movement in RMBS will map closely to upward movement in AMD, so you're not getting any kind of hedging or diversification by shorting RMBS. -Eric