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Strategies & Market Trends : Expirationless Options (XPOs)- The Next Big Thing -- Ignore unavailable to you. Want to Upgrade?

To: Win-Lose-Draw who wrote (29)	7/9/2005 10:05:46 AM
From: VLD3	Read Replies (2) \| Respond to of 60

So the IRS is going to rewrite Section 1032? Sorry pal, they have already tried twice, it went all the way to the Supreme Court (twice) and the Service lost both times. The tax-deferment of open transactions is the law of the land, and this Court is not going to reverse itself on that issue. The Court is moving to the right, not the left. Option income is tax-deferred; margin income is tax-deferred; transactions by a corporation in their own stock is tax-exempt. That's not going to change. I would like to hear your arguments, though, about why an equity issue by a corporation should be taxable.

To: Win-Lose-Draw who wrote (29)	7/9/2005 10:19:33 AM
From: VLD3	Respond to of 60

Does bring up a good point though - the margin requirement for a short call option if you own the underlying is zero. That means that anyone with a large stock portfolio could "monetize" their investment without selling stock, just sell the XPO call option, keep the equity (and any exiting or future dividends). Anybody thought about what this does to the dividend yield? Another thought: you could short the option and buy the underlying (also increasing dividend yield on a per dollar basis). If MSFT is selling for $25, the at the money XPO is 40%, and the dividend yield is 1%, then selling the XPO call option at $10 means you are buying the stock at $15 (net-net). No margin requirement because you can post the stock. Dividend yield is now 1.67%. As the XPO price rises, so does the dividend yield. Seems that would hold the XPO call price in check on a dividend paying stock if nothing else. Another thought: even if it's a non-dividend paying stock, you could short the XPO call, buy the underlying (at full price), deposit the XPO call premium in an interest bearing account and CREATE a dividend on a non-dividend paying stock. That should be sufficient to hold the price of the XPO call option down on even a non-dividend paying stock. Any thoughts?