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 : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Andreas who wrote (18681)	3/1/1998 7:42:00 PM
From: Mike Gordon	Read Replies (2) \| Respond to of 97611

<Are you not concerned about this scenario or worse that cpq drops even lower than $29.00?> Andreas: Excellent question. I'm as concerned as anyone who owns the stock today. The downside risk is identical. However, I have a fundamental advantage seen in: A. When CPQ was at 33, I received 1 1/16 to sell 10 March 32.5 put contracts. At the time of the sale, I had a margin of error from the existing price of 33 to my actual cost of 31 7/16 if and when the stock is put to me. B. In the meantime, I buy time for CPQ to recover above 32.5 and I earn the interest represented by the 32,500 I will eventually have to pay if CPQ remains under 32.5. To your point, if CPQ is 29 at March options X day, I will implement a recovery program by selling the April 30 Calls. Depending on what I receive for the Covered Calls, lets say $1, my cost basis is now 30 7/16. However, anyone who purchased CPQ at 33 that day, is now looking at a loss of $4 if CPQ is $29. As stated in earlier post, by selling any covered calls, I limit my upside recovery. Hence, this is not a strategy for long term investors. (BTW I shorted 10 puts at 32.5 and 10 at 35. I contend that CPQ should be above 35 buy the end of March. If not, I simply sell covered calls when the stock is put to me.) Mike Gordon.