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

To: Elmer Phud who wrote (177847)	5/7/2004 2:32:13 PM
From: Robert O	Respond to of 186894

One ought, every day at least, to hear a little song, read a good poem, see a fine picture, and, if it were possible, to speak a few reasonable words. -Johann Wolfgang von Goethe

To: Elmer Phud who wrote (177847)	5/7/2004 5:29:49 PM
From: williamlp	Read Replies (1) \| Respond to of 186894

elmer: I agree but only if you would have sold them. In Intel's case I don't think they would have sold them so they aren't losing the $100K. Do you think Intel would have sold CCs if they hadn't granted those options? If we extend your reasoning then everyone who holds shares and doesn't sell Calls is losing money and should declare that as an expense. They're giving away something (options contracts) which has a very tangible value in the market. Once they write up the contract, it's worth something at that moment. In fact, the value is quite well defined: the bid and ask prices for options aren't usually all that far apart. The particulars about whether I'm hedging an option I'm giving away by stock I own don't matter. I'm still on the hook for the option call whether I sell it for $100,000, or give it away. It's quite clearly a $100,000 loss to give it away, since the option is valued by a pretty fluid market. What I gave up may be worth a lot more than $100,000 on the expiry date, or it may be worth nothing, but this doesn't matter any more than if I give away a car that may become an antique or may break down next year. Or if I give away a stock that pays more dividends (eventually) or files for Chapter 11 next year. This reasoning doesn't seem very unclear to me. What do I say that implies that if I hold shares and don't sell calls it can be an expense? If I don't sell calls, that's no money. If I do sell calls, I lose the calls, and gain cash, which should be fairly equal in (market) value. Zero and zero. Now if I write calls and give away the money from selling them, that's an expense. If I write calls and give them away, that's also an expense (exact same effect to me.) So again, your reasoning requires that you would have sold the options if you hadn't granted them instead. I don't think that assumption is valid. If you can show me where Intel has a policy of consistently selling Calls on the open market then you will have a solid case. Otherwise all Intel has done is place a cap on the potential upside of shares they hold in inventory, which is opportunity lost. My opinion is that this shouldn't represent an expense at the time of the grant. All imho. Who cares if Intel consistently sells calls on the open market? They still have value, whether they sell them or not, or "would have" sold them, or what. Why is this relevant? The net effect of owning stock and selling call is putting a limit on upside, of course, but this doesn't change the fact that there are two things involved, both valued by the market and readily tradable, and that I'm giving one away.