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Technology Stocks : Winstar Comm. (WCII) -- Ignore unavailable to you. Want to Upgrade?

To: Brian Coakley who wrote (9344)	11/17/1998 3:24:00 PM
From: Night Writer	Read Replies (1) \| Respond to of 12468

IMHO This is a covered call play. You sell covered calls to finance the purchase of putts to protect your position. This gives you a number of options. If the stock dips between now and April, you can close call position at a lower price. The idea is to make enough profit to finance the putts. At that point, you own the putts for free. Then, If the stock goes up you make money on the stock while the putt options expire worthless. If the stock goes down, you sell the putts for a profit off setting loses on the stock. You don't lose money on the stock, and reduce your cost basis. This is a sophisticated options play. The only way to lose is if the stock goes up and stays up. Timing is important if you want to keep the stock. This is a great options play by someone with a lot of intestinal fortitude. NW

To: Brian Coakley who wrote (9344)	11/18/1998 2:07:00 AM
From: SteveG	Respond to of 12468

<..making it a syndicated short position with no additional risk between 29 3/8 and 35...> Roughly agreed Brian, but with the clarification that the 5/8 spread <$31,250> is an additional absolute cost/risk over a "real" short (see table below) However, as % of underlying collateral, the risk leveraged in the synthetic short - as with ALL options - is much greater than with a straight short. Also, if the strategy is married to an equivalent long position (as NW suggested) it's a riskless conversion box - an arbitrage (mainly used by MM's due to cost/benefit), or else a simple locking in of profit or limiting of loss with an otherwise unsellable stock (as in shorting against the box). =========== [cost/reward table for 50,000 at 30 strike] compare _____________________\|_____________________ \| \| \| only only \| price short object short calls buy puts synthetic short 45 <$750K> <$475K> <$306,250> <$781,250> 40 <$500K> <$225K> <$306,250> <$531,250> 35 <$250K> +$25K <$306,250> <$281,250> 30 -0- +$275K <$306,250> <$31,250> 25 +$250K +$275K <$56,250> +$218,750 ================== BTW, MSFT loses second appeal on Sun Java case - and they have 90 days to comply or have Windows98 removed from market. They don't seem to be appealing any further. In addition, this will likely bolster Justice's case. [May the Force be with you]