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

To: Windseye who wrote (28858)	7/11/1998 1:09:00 AM
From: ed	Read Replies (1) \| Respond to of 97611

Mr. Wineye: I think the best strategy is to buy year 2001 Jan leap with strick price $35 at $10 per share. By paying $40000 premium to hold for two and half years, you save the interest of $20000 and use that to pay for the premium, and your max loss is $20000 for two and a half years of holding, and the premium you pay is about 33 cents per share per month . At the time of expiration ,which is two and a half years away, your balance point is $45. At the day of expiration, which is the third Friday of Jan, year 2001, if the stock price hit $100, your net profit is $220000, and total capital you can raise is 4000 * ( $100 - $35) =$260000, and you can easily exercise the option with a margin of 65%, or sell 50% of the option and exercise the othr 50% of the option with full cash, and you probably will still own 4000 shares at that time after a 1 to 2 split. The worst case is you lose all you $40000 if CPQ is below $35 at the end of the expiration. But do not forget, if you buy stock by margin, according to your ratio, you will also pay $20000 of interest for two and half yars, and you run the risk of margin call and may lose more than 50% of your investment. My suggestion is buy 40 contract of year 2001 $35 contracts, and each of the following year just buy antother 20 of long leap which is two years away, and hold it for long long time. Do not forget that starting from the second half of 1999, it will be hot years for NT for the next couple of years. It means high growth for CPQ when the integration of DEC is ready.