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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (56025)	10/20/2001 6:05:16 PM
From: JimieA	Read Replies (1) \| Respond to of 77400

"Is Merrill so confident in Cisco stock..." I don't think ML is confident about Cisco's stock. Isn't ML effectively shorting Cisco's stock at $16.72 a share. That ML will deliver in two years. I still do not think this requires any envolvement by Cisco. ML collects the proceeds, pays the interest and delivers the stock in two years.

To: RetiredNow who wrote (56025)	10/21/2001 10:30:27 AM
From: Stock Farmer	Read Replies (1) \| Respond to of 77400

mindmeld - you raise some points worth pondering. But it might just be something different. Looks like ML is offering the public to take counter-party position to a collar. Not necessarily on their own holding. Perhaps on someone's stock options, or on behalf of the principles in a company that Cisco is gobbling up. The cash payment of 8% versus risk free rate on the up-front fee represents a net-present-value of about $1 per share on a price of $16.72 So if Cisco dips by $1.00 (NPV), then ML's client wins outright. If Cisco fails to gain $1.00 (NPV) then ML's client also loses outright. But if Cisco gains more than $1.00 (NPV) then ML wins by the difference (reduced perhaps by any incremental payments related to its call option). What is unusual is that despite their "think bullish" attitude, ML is not absorbing the downside risk themselves for a larger stake of the upside. In essence they are hedging against downside to Cisco. Which should tell you something. You might also note that $0.33 per quarter plus a share of Cisco after two years is about 10 times higher rights to money than outright ownership of a Cisco share. Even if you count pro-forma money. Which should tell you the same thing. John.

To: RetiredNow who wrote (56025)	10/22/2001 8:29:31 AM
From: GVTucker	Read Replies (1) \| Respond to of 77400

mindmeld, Cisco doesn't have anything at all to do with those STRIDES. It's nothing more than Merrill taking advantage of an opportunity in the market. In this case, that opportunity is a pool of investors who want to own Cisco but are afraid to take the entire risk. Merrill can create these securities from scratch, hedge themselves completely, and still book a good profit from the fees. (Note that this is possible because the owners of the STRIDES cannot redeem them prior to maturity, but Merrill can call them after one year.)