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.

Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Ken Beal who wrote (75094)	10/28/1998 2:31:00 AM
From: PAL	Read Replies (2) \| Respond to of 176387

This was done about 5 months ago, Dell shorted the Nov 55 put (pre-split) big time. The option was way out of the money. The rationale was: Dell is willing to buy back a lot of shares at 55, but if the stock stays above 55, then Dell retains the premium which can be used for repurchase. Buying calls involves cash outflow and might lose all. On the other hand, shorting put generates cash flow. The strike price almost ensures keeping the premium. Should Dell do it again after Nov expiration, I will copy its strategy.

To: Ken Beal who wrote (75094)	10/28/1998 4:05:00 AM
From: nihil	Respond to of 176387

RE: Why not buy the call? The key is maximizing stockholder value. Spending cash to buy calls would deprive corp of value and would either lose the premium or pay some stockholders a premium if the calls were exercised. In contrast, selling puts helps protect stockholders against deep price drops, accumulates stock at prices below recent or earns a premium. Another important provision is that corporations cannot legally buy their stock on an uptick (defined very broadly) because this is stock manipulation. But it can buy on the downtick. The preference for put selling is shown by its success by companies like Dell, Microsoft, and Intel in both earning premia and accumulating stock at good prices.