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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: DavidD who wrote (12598)	11/25/1998 11:28:00 AM
From: nihil	Read Replies (1) \| Respond to of 74651

RE: naked options Didn't mean to be patronizing, but being expert in finance you doubtless recognize that Microsoft has the shortest possible position in MSFT -- having sold (or given away) ~2.5 billion shares. As a result, when it sells 75 million puts they are wildly over covered. In addition, they are covered by the net-share option, which can prevent an uncomfortable cash outflow. Thus there is no possibility that Microsoft would default (like you or I might), because MSFT has "monetized" its stock by the net-share option.

To: DavidD who wrote (12598)	11/25/1998 12:53:00 PM
From: Reginald Middleton	Read Replies (1) \| Respond to of 74651

<Nonetheless, this relates to the p/e premium for the stock and how much one is willing to own. Selling options naked is risky business.> MSFT is not selling options naked. They are both a natural consumer and producer of the stocks and warrants. They have a need to byuy stocks below the ESO strike price. Since they have stocks in treasury and the option to settle in cash, they are covered on the warrants if they are called. The put warrant sales are simply a low cost, low risk method of funding a share repurchase plan. The P/E premium for the stock has very little to do with any of this. For reference, see rcmfinancial.com