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.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: PaperChase who wrote (30304)	7/28/1998 12:04:00 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

PC, Last question first. The short sales are also double counted, so you should not have divided the 40 million shares by two. However, 40 pct. still sounds high to me. A collar basically uses options to limit price moves. I have no idea how ADCT plans to use a collar in their buyback program. The options do not necessarily have to be listed as these collars are sometimes put on by investment bankers or other intermediaries. My guess is that they want to limit the price they pay, so they are synthetically shorting puts and buying calls to make some sort of net price. For example,if the stock were selling at $41, they short a put at $40 and buy a call at $50, they will not have to pay more than $50 for the stock, but if it does not hit $50, they score the net premium and buy the stock at a lower price than in the current market. They run the risk of not getting the shares, but they can always try again. There are many other ways to use options to make a collar and I'm not sure what they are trying to accomplish. I do know that this is the way MSFT buys back their stock. MB