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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (151350)	12/6/2001 3:12:37 PM
From: Elmer	Read Replies (1) \| Respond to of 186894

You can't be serious, Elmer. An option to purchase Intel at a fixed price has an economic value. heck, you realize this value often; you sell covered calls on Intel, right? Sure I sell CCs and Puts as well, but there isn't any expense to anyone until money changes hands. If you are arguing that it is an expense to Intel because they could have sold the option to someone else instead, I could argue that everyone who doesn't sell CCs has an expense for the options they don't sell. That's nonsense. And that is because options do have value, and by giving them away, Intel is incurring an expense. If there weren't share repurchases, the owners of Intel would incur this expense by dilution. Intel repurchases shares instead, and thus the owners of Intel incur this expense by having less cash on the balance sheet. Again I don't see how there can be an expense when no money has been expended. Intel is giving options away, not stock. The stock must be paid for so how can you say there is less cash on the balance sheet? The exercise of options results in the selling of shares. Selling shares adds cash, the same amount of cash that was spent buying the same shares that are now being sold. This is a push. If there is any loss it's in the interest lost in holding those boughtback shares for 5 years until the option is exercised. There you can make a case. EP

To: GVTucker who wrote (151350)	12/6/2001 4:33:43 PM
From: Mary Cluney	Read Replies (4) \| Respond to of 186894

GVTucker, <<<options do have value, and by giving them away, Intel is incurring an expense. If there weren't share repurchases, the owners of Intel would incur this expense by dilution. Intel repurchases shares instead, and thus the owners of Intel incur this expense by having less cash on the balance sheet. >>> I am truly embarrassed. I don't really understand this. This is the way I always thought it worked (and I am not kidding): I have a pantry with 90 Beans in it and they are worth $10 each. I also have in a jar $100 in cash. I'm worth $1000. Instead of paying you to fix the door on my pantry, I will grant you an option to buy 10 of my beans at current MFV of $10 each at any time within the next 50 days. I go out and buy 10 more beans at $10 each. I still think I'm worth $1000. I now have 100 beans. Over the next 25 days, the price of these beans double. All of a sudden, I'm worth $2000. Oh, yeah. You have an option to buy 10 beans at $10 and you choose to exercise that option. I now have 90 beans worth $20 each and $100 in cash. I think I'm worth $1900. Whether you exercise yours options or not, my net worth is: X Beans on Hand minus - (the difference between Y Obeans - Y Options). I don't see that I have lost $100. I only see that I have made $100 less. And my pantry door has been fixed. What am I missing? Mary