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To: sibe who wrote (5147)	3/22/1998 5:47:00 PM
From: tech	Read Replies (1) \| Respond to of 10786

RE: >> Selling short vs. buying puts. << I do sell short from time to time, but I wouldn't do it with a Y2k stock... well other than ZITL which I shorted back down from its absurd run. Basically, in this sector at any given time any company could win a project that would take the stock higher. With the amount of HYPE and uninformed investors that jump on the wagon, it would be very easy to get caught in a short. You also have higher capital requirements for taking short position and a lot more risk vs. buying the puts. For example: You short 1,000 shares of ALYD at $19.00 In most cases you have to come up with a margin of 50% and maintain that margin. so you have to put the equivalent of $9,500 up. Now lets say the stock goes to $14.00 and you cover. Well basically put up $9,500 and made $5,000 a 53% return. ( although, since you are only required to keep a 50% margin and you could have taken money out while the stock is going lower, we will just use the $9,500 as your cost basis.) ==== Now lets say you bought some APR.15 puts (QLIPC) for 5/8 You bought a 1,000 shares for your short, so we will buy the equivalent (10 contracts). You spend $625 (not including commis.) well now if the stock takes the same turn and drops from $19 to $14 your puts should go up (depending on time till expiration) by the equivalent amount. In this case we will say the go up in value by $4.00 well, you spent $625 for 10 contracts at 5/8 .... and now they are worth approx. $4.00.... that comes out to $4,000 you basically made $3,375 on a $625 investment... a 540% return. =============== now if you guess wrong and the stock takes off. If you shorted, you would either keep having to put money in and keep your margin at 50% .... or go into the market and cover your short position. now if you only bought the puts... the most you can lose is the $625 you originally put up. =============================================================== Now shorting against the BOX is when you basically put up your own shares as the margin and if you guess write, you protected yourself (since you still own the stock) on the way down and if you guess wrong the worse that can happen is you have to sell your shares at the price you took the short position at. the only real down side risk is opportunity cost of the stock moving higher. I will probably use this method once I take profits on my CSGI shares.