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

To: upanddown who wrote (34712)	10/28/1998 1:01:00 PM
From: yard_man	Read Replies (2) \| Respond to of 132070

>>especially CCU<g>.<< Sure getting a haircut lately isn't it?

To: upanddown who wrote (34712)	10/28/1998 6:05:00 PM
From: Knighty Tin	Read Replies (4) \| Respond to of 132070

John, I wrote up Lucent a couple of weeks back, but here is the Dell deal. Actually, it is only one of three trades I put on at different times with different puts and calls, but this is one I tood off today, so it is fresh off the broker's lying lips. <G> I bought Dell at $154 on 10/14. I sold Jan 2001 55 strike price calls at 21 1/2. I bought Jan 2001 50 puts at $14.25. OK, here is how this looked then and how it looked today when I punted it. Standstill. If Dell went to Hell in a handbasket, I would lose $4 on the stock (that's where it hits my put strike price of $50) and $14.25 on the puts. That is $18.25. I had $21.50. So, worst possible outcome is that I make $3.25 on a $46.75 investment in a little over two years. That would have been crappy, a return of about 3% per year. However, it not only would have been zero capital loss potential, it would have been profitable. I like cases where the worst possible return is positive, even if minimally so. If Dell goes to zero, I still make 3% a year. The standstill maximum return is $1 of stock profit (that's where the stock hits my $55 call price strike), $14.25 of loss on the put, and $21.50 of profit on the call. That is $8.25 on that same $46.75 investment, or 7.84% per year. That is a respectable return for a zero risk (actually negative risk) two year income holding. If you average the worst and the best standstill returns, not surprisingly, the average expected return comes to 5.42%, a wee bit more than two year Treasuries. However, Dell went up immediately. Today, I sold Dell for $54.125, bought back my calls for $29 and sold my puts for a whopping $12.75. I lost $1.50 on the puts, lost $7.50 on the short calls and made $10.125 on the long stock. That is a net profit of $1.125 on an investment of $46.75. Or 2.4%. In 15 days. That annualizes to 58% a year. My other Dell investments did even better because I legged into them, buying the puts after the stock went up. But this is an example of the occasional lucky one where you can actually set up a nice income trade by taking no risk. And you can see why I describe my income techniques as manic trading. It is even more manic in the partnership accounts where I don't have to mess with the stock. MB