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

To: Don Green who wrote (54692)	12/22/2000 1:55:49 PM
From: JB	Read Replies (1) \| Respond to of 74651

The article on margin calls for the Softies ran in the papers almost a month ago up here. Old news! Jack

To: Don Green who wrote (54692)	12/23/2000 1:08:35 PM
From: margin_man	Read Replies (2) \| Respond to of 74651

1. Why didn't the employees use the so-called "cashless" method to exercise the options and sell the shares? This requires no money up front. Of course, unless the options were about to expire and the employees wanted to hold the stocks longer. 2. Feinstein explained. ``A lot of people had the option to buy (Microsoft stock) at $70 a share,'' Feinstein said. ``If you had the right to buy 1,000 shares, you had to come up with $70,000'' -- not the kind of money a programmer at Microsoft would have lying around. So, he said, the programmer would go to Salomon Smith Barney and take out a loan for the $70,000. ``When the stock went up to $110 or $120, he could sell the shares, pay off the loan and make $50,000 without ever doing anything,'' Feinstein said. But ``when the stock drops from $70 to $40,'' he added, ``the loan is called and the stock is sold to pay the loan. But that's income. You have to pay 28 percent to government when you never got anything. How can one have an income if one bought a stock for $70/share and sold for $40/share? Wouldn't that be considered a capital loss?