Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: g.w. barnard who wrote (9196)	1/29/1998 10:09:00 AM
From: prakash	Read Replies (1) \| Respond to of 13925

There is also another strategy which may work out perfect with this stock. Synthetic long - where you sell the puts and use the premium to buy the calls. July 17.5 puts are at 3.5, and July 20 calls are at 3.25. Instead of just buying July 20 calls, you could sell the July 17.5 puts and use that premium to buy the calls. This way if the stock were to go to 30 in july, you are looking at a pretty good return for virtually no investment. Downside of this approach: 1) most brokerage houses will ask for collatral when you write puts. For example, I trade with Fidelity and the minimum amount they need is 2k per contract. You may as well buy 100 shares of CREAF for less than 2k. 2) If the stock were to be stuck in this trading range and never went above 20 by july, solves no purpose and the money is you deposit to write the puts will be dead investment. Prakash

To: g.w. barnard who wrote (9196)	1/30/1998 3:57:00 PM
From: Burton Waxman	Respond to of 13925

HI GW: I don't mind your input at all. The comparison of the two cases (CREAF and CUBE) were not exactly the same however. If your CUBE were to fall to 10-12 you would be sitting with a large loss on your long position and your short position would also be vulnerable to having the shares placed to you at a premium. The strategy I was expounding however, was not to place yourself in any great risk. By selling the July 17.5 puts at 3.75 the basis our your cost is less than 14. At the same time the interest on the entire 17.5 in your money market account is another 1/2 point, bringing the total cost basis to about 13. If the stock does drop to about 12 you've lost 1 point or about 7.7% versus a 25% gain if the stock were not to move at all. If the stock were to drop to the 12 level however, you could still rebuy the puts and sell puts at 12 recouping the lost point and then some. Remember, the 17.5 value that you have contains 3.75 of their value. On the upside, calls will rise with a rising stock, forcing you to repurchase at a higher level if you want to remain long; however with selling puts the value of the put decreases with a rising stock letting you recoup your profits in a shorter time frame. Best of Luck. BURT