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

To: jonkai who wrote (72184)	8/17/2002 2:45:57 PM
From: Charles Tutt	Read Replies (1) \| Respond to of 74651

The problem is that the volatility calculated from the stock price history (and that's not even a unique number, since it varies according to the time window used) differs from the volatility implied by the options traded in Chicago (which is also not unique, since it changes from minute to minute as the options trade), and neither necessarily represents the future volatility, which is probably what you want for the theory. In other words, it's not that simple. JMHO. Charles Tutt (SM)

To: jonkai who wrote (72184)	8/17/2002 2:55:07 PM
From: jonkai	Respond to of 74651

for instance if an employee was granted a $50 option today... that expires in January of 2005..... by the way, even though this option is "out of the money" it still has that value..... which David howe seems can't understand.... options have value... all of them depending on many factors.... and the only formula that calculates them all properly is Black scholes...... another thing David Howe is not understanding is that MSFT is forced into buying stock back at higher prices than it is selling them...... a no no for investing.... and what happens when you create a pyramid scheme.... MSFT took in about $17 billion in the last four or so year in option strike prices and the tax benefits and the put warrants it sold.... but for the same amount of stock it issued, it needs to pay $30 billion to buy it all back (if it wants to return value to the shareholder)...... that is paying $2 for every $1 they got up front..... (THAT IS WHY ESO's are a real EXPENSE)...... one way or the other it is costing MSFT shareholders..... even if MSFT never buys back this stock..... just this last year they had to buy back $6.1 billion worth of stock.... think about that for a moment, they only got $17 billion from this scheme.... and even after $6.1 billion in buy backs, they still need to spend an additional $30 billion to buy back stock if they wanted to return this value to the shareholder..... that is some mighty powerful true shareholder debt.... jon.