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

To: Michael Ohlendorf who wrote (16660)	2/22/1999 11:11:00 AM
From: Green Receipt	Read Replies (1) \| Respond to of 74651

Does anyone know if the msftp stock will be affected by the split of msft? I read in the proxy that they said the preferred shares would be changed via a different notice. are the preferred shares msftp? or something else?

To: Michael Ohlendorf who wrote (16660)	2/22/1999 11:29:00 AM
From: Bhaskar Sengupta	Read Replies (1) \| Respond to of 74651

Margin requirements do not depend on the specific company that you are trading. Rather the requirement depends on the brokerage company that you are using. The requirements probably vary, but not by too much. At Waterhouse securities, for an uncovered put, the margin requirement is Option premium + 25% of stock price - any amount out of money Example 1: XYZ trades for $31 and you write a put at a strike price of $30 and receive a premium of $2. Your margin requirement is $2 + $7.75 - $1 = $8.75. However, note that your account balance will go up by $2 after the trade, so the net margin requirement will be lower if you decide to keep the $2 in the account. The rules for uncovered calls are similar. Example 2: After 15 days, the stock price moves to $20 and the same option that you sold is trading at $11. You can buy back the option at $11, and take a loss of $9 on the transaction. Example 3: After 15 days, the stock price moves to $20 and the same option that you sold is trading at $11. However, the holder of the put assigns the stock to you. You have to cough up $30 to buy the stock and you decide to keep the stock. For IRS purpose the basis of the stock is $28 ($30-$2) and the purchase date is the date of the assignment (for determining the holding period of the stock purchase). Example 4: After 15 days, the stock price moves to $20 and the same option that you sold is trading at $11. However, the holder of the put assigns the stock to you. You do not have the $30 to buy the stock, however, there is no escape. Your broker will make you buy the stock at $30 and make you go into debt. You can, if you want, immediately sell the stock at $20. Your net loss is $8 ($20-30+2) and this is short term loss. I should add that the margin requirement varies as the stock price changes. So in the example: After 15 days, the stock price moves to $20 and the same option that you sold is trading at $11. The margin requirent is now $11 + 5 =$16. Even if you are not immediately assigned, the margin requirement can dramatically increase because the stock price has fallen (for a written put). So be careful and have plenty of spare margin in your account when you write an uncovered option.