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To: Charles Tutt who wrote (18573)	8/3/2001 8:01:10 PM
From: WebDrone	Respond to of 21876

Hedging with puts instead of common- Charles, of course it's possible to use put options instead of shorting. Just to make life interesting for the computer, you would then use the Black-Scholes equation to determine fair pricing of the out of the money puts. I've experienced this type of deal with a smaller company with a smaller options volume. It still seems to me that one always pays a time premium on the option based on the going fed rate. If you have cash, YOU keep the interest instead of the person writing the put... This stuff is fascinating. And it's actually a very conservative type of fund that may want to play- I mean, 8% with minimal risk... that looks pretty good in a crappy market! We should see a huge jump in short interest next time the numbers are updated. And it might be a good time to sell puts... but I'm too chicken for that! Web

To: Charles Tutt who wrote (18573)	8/4/2001 5:35:57 PM
From: GVTucker	Respond to of 21876

Charles, RE: Couldn't they accomplish something similar, without involving the common directly, through the use of options? Biggest problem there is that buying puts costs money plus time value. If you short sell then you get cash, and with that cash you can get interest. You can erase a piece of that time value of the put by selling a call with the long put, but even then you're dealing with a less liquid market and two transactions instead of one. That cost usually isn't recouped. In addition, selling the call and buying a put usually results in net zero cash, while short selling entails net negative cash--once again the advantage is in a short sale.