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

To: Geoff Nunn who wrote (82475)	12/1/1998 9:13:00 PM
From: BGR	Read Replies (1) \| Respond to of 176387

Geoff, If you define rate of return as inclusive of cost (viz. the risk-free interest rate) then rate of return = risk premium in which case I agree with your model as I had mentioned in my earlier post. Also, it is indeed true that the future and cash price relation holds only for instruments where cost = the risk free interest rate. Now, I have a question (which, interestingly, I never though about in the last few years that I have been trading options :-)). If expected return of an option = that of a zero coupon bond, and in general volatility of the former is > that of the later, why speculate in options at all and not instead use margin? The only two justifications that I can think of are better leverage since most people cannot borrow at the risk free interest rate thus making margin relatively unattractive and lower total transaction costs taking into consideration the possibility that the option is not exercised. The assumption here is that the margined stock gets sold off at the option expiration (which may be extended indefinitely in theory using B-S) as well. Do you agree/disagree? TIA! -Apratim. Edit: Another advantage would probably be no margin calls.