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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (6965)	1/23/1998 1:05:00 PM
From: vegetarian	Read Replies (1) \| Respond to of 13594

>>Maybe that's what it's called, but it has significantly more leverage and you can protect up to the spread between the two calls. Looks cheaper than just going short. What am I missing?<< Spread+the cost of protective cheap calls that you may keep so often. The missing link is that with a direct short position, if the trade goes against you you can afford to sit on the loss if you beleive that fundamentally the stock will fall in a longer frame without incurring much problem (may be margin interest), with a synthetic short if the position goes against you, you may have to take a loss because you could end up exercising the cheap call you bought if the call you wrote is exercised.