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To: GVTucker who wrote (178803)	7/24/2004 5:30:16 AM
From: Amy J	Read Replies (1) \| Respond to of 186894

GV, RE: "What you're describing there is a "right", and a lot of smaller companies use that as a capital-raising strategy." I know - we have some warrants in our term sheets. RE: "This really isn't much of an option for larger companies for a variety of reasons." Why not? On another note, there's a Yahoo post on Microsoft's dividend that I was wondering if you could please shed some light on: tinyurl.com ====================================================== Question about dividend. by: foo_999999 07/23/04 11:41 pm Msg: 838357 of 838397 Folks, I have a question, I could use help on. I understand that if I own MSFT stock on Nov17, I would get $3 per every stock I own. right ? So lets say I have $8400 to invest right now and MSFT is at $28 on Monday. I go ahead and buy 300 shares of MSFT. On Nov 17th, I will get $900 added to my account. There is a very good likelihood that the stock will drop $3 on Nov 18th and I may end up with almost no gain. If the stock stays at $28, then I walk away with about 11% ($900/$8400) gain. Correct ? However, What if I decide to write covered calls and buy more stocks with the premiun I got ? Say for example, I buy 300 shares like in the earlier example with $8400 I have. But then I also write covered call for 3 contracts for January 12.5 (MQFAV). It goes for about $17. This would generate $5100 for me. Say I buy more MSFT shares with it. Lets say I buy more shares with it and keep doing this, till the money generated by covered calls is too little. In other words, with my $8400, I can buy approximately 700 shares of MSFT, if I am write Jan 12.5 covered calls. Now, On Nov 17th, I will get $3 dividend on 700 shares (= $2100). And almost certaily I will get called on January on my Jan 12.5 covered calls (and I'll get back about $8400 back). When my calls expire, I will end up with $8400 + $2100 = $10500 -> which is 25% gain over my earlier amount. Correct ? I understand there is risk that I can get called on Nov 16th and not benefit. But I can then get to keep the time premium, instead of the dividend, for being called too early (I would probably write a in the money leap covered call like Jan 2007 strike price 20 or so instead of the example I gave) ? So, what do you think about my line of thinking ? Any feedback about the flaw in my thinking is appreciated. Thanks. foo. ====================================================== 12.5 +17-28 = 1.5 *700 (using example above) = 1050 = 12% GV, isn't there more money with less risk to be made in this particuarl dividend compared to regular covered call approach? Or, do the forces of stock price balance out somehow? If so, how? in the premium of covered calls? Regards, Amy J