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To: Jacky AY who wrote (4773)	3/15/1998 12:46:00 PM
From: Arthur Radley	Respond to of 7841

Interesting interview in today's New York Times of Robert Olstein, head of the Olstein Financial Alert Fund. This funds annualized return since September,1995 is 31.2%. Olstein is a frequent guest host on CNBC's, Squawk Box. "For example, he is buying SEG, which already accounts for 2.5 percent of the fund. Analysts have focused on the company's excess inventory in its disk drive business, he said, and are issuing forecasts of poor earnings over the next two quarters. Even so, he predicts that SEG can earn $2 a share in 1999, compared with minimal earnings this year. Olstein points out that the company has no net debt and has $945 million excess cash on its balance sheet. He concludes that it has no major financial problems; it just isn't earning much money at the moment. Given that SEG can generate $3 in pre-tax free cash flow per share a year over the next five years .....Olstein figured a cash return of 13.2 percent. He estimates a share price of $30 to $33 over the next five years."

To: Jacky AY who wrote (4773)	3/15/1998 11:34:00 PM
From: dave g	Read Replies (1) \| Respond to of 7841

Risk assessment and naked puts: I certainly agree that this is not a risk-free strategy. But let me flesh out my selection process (I do avoid high-flyers like internet stocks). When I get put, I do buy on margin, paying 8.4% interest. So when I decide to sell puts, I look at how many months of interest are covered by the initial premium. Using CPQ as an example, it is at 25 and 3/8. The April 25 puts are bid 1 and 3/16. If I get put, I have to pay 17.5 cents/month per share in margin interest. So my initial premium covers me for 6.7 months - let's say, through October, since I'm leaving out commissions (which vary from broker to broker and can be diluted according to the volume of your trades). Now, I see also (from the handy chart available free at www.cboe.com) that with CPQ at its current level, the April calls at 32.5 last traded for 3/16 (18 cents - equivalent to my monthly margin interest). This lets me guess that even if CPQ falls to 20, I can probably still cover my interest with covered calls. The question becomes: what's the likelihood of CPQ taking a big hit? I take some comfort from the fact that even with downward revisions, many analysts are maintaining a buy rating on the stock, and my off-hand averaging indicates FY 98 EPS estimates are around $1.00 per share with FY99 around $1.40 (conservatively). Yahoo! finance shows 98 EPS estimates of $1.68 with $2.10 for FY99, but I'm not sure that takes into account the latest round of downgrades. Anyway, I would only start losing money on this around October, and that's if CPQ is trading at a forward P/E of under 14 (using $1.40 FY99 EPS estimates). Again, there are no guarantees, but I think that's pretty safe -- especially compared with the upside potential. The April 20 puts last sold at 3/16. That implies that if next week Compaq jumps up 4-5 points, I can buy back the 25s at a similarly low cost and then apply my unused margin somewhere else. As for portfolio percentages, I would recommend that any investor/speculator keep a fairly diverse portfolio and not get overweight in any one stock/option position. As a rule of thumb, leave yourself enough leeway for at least one averaging-down if the stock collapses. If you're put at 25, buy an equivalent amount at 15 to bring your average cost to 20. You'll then pay 14 cents/share/month in margin interest, but I think you could cover that with call premiums with the stock at 15 and strike price at 20. Remember that in the example above, your premium alone covers you until October -- I've left out whatever you get from selling covered calls. Sorry if I went on too long -- but I want to be clear for those who aren't as familiar with options and margin. Thanks for the reply; we should all enjoy being challenged to defend our views. Dave.