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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Wallace Rivers who wrote (4792)	8/23/1998 9:46:00 PM
From: jeffbas	Read Replies (1) \| Respond to of 78998

On RUM, if you split the $8 1/2 price into a risk free return price (of about $7 1/2) and an option price (of about $1), I will bet (without even checking) that $1 for the 6 year option is a lot cheaper than the implied pricing on LEAPS on something 25% out of the money. Another way of looking at it is if the Russell goes up at stocks historic annual rate of return of about 10% for the next 6 years, you will end up with about an 8% annual return from RUM, with no risk of worse than a 2.7% return.