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To: John Meares who wrote (86946)	12/25/1998 11:58:00 AM
From: BGR	Read Replies (3) \| Respond to of 176387

John, What Paul is doing is simulating purchase of CSCO equity with no money down. In other words, the profit profile is identical to buying CSCO commons at 100% margin. For example, 1. Simulated equity buy with no money down, 10 calls bought and 10 puts sold, strike 100 for both: CSCO at 50 on expirey, calls valued at 0, puts at -50, net loss -50 * 10 * 100 = 50000. CSCO at 150 on expirey, calls valued at 50, puts at 0, net gain 50 * 10 * 100 = 50000. 2. Equity buy on 100% margin, loan 100000, 1000 CSCO commons bought. case 1, net loss = -100000 + 50 * 10000 = 50000, ignoring interest. case 2, net gain = -100000 + 150 * 10000 = 50000, ignoring interest. The beauty of the simulated strategy is avoiding margin altogether hence no margin interest, a saving of 10000 at least. -Apratim.

To: John Meares who wrote (86946)	12/25/1998 2:28:00 PM
From: PAL	Read Replies (2) \| Respond to of 176387

The downside is that at expiry (Jan 22, 2000) CSCO will close at below 100 making the call worthless and will be put at 100. However to overcome this, using Don Martini's recipe, you rollover the put by buying back Jan00 100 put and sell put of the same strike price further out. Considering CSCO is the dominant player in its field, I doubt that CSCO will be less than 100 at expiry. Anything above 100 is just gravy. Good Luck Paul