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

To: Chuzzlewit who wrote (111902)	3/24/1999 8:02:00 PM
From: edamo	Read Replies (7) \| Respond to of 176387

chuzz...you must be tired..you didn't catch my math error.. risk...less than long...the advantage is accumulation of stock without using margin...a bullish play...but why would anyone invest if they think a stock will go down... 8500 cash go long today @ 38.5=221 shares stock drops to 0....goodbye! 8500 cash collateral..sell 1 put with 4650 premium...buy 120 shares @ 38.5=4620... stock at zero...i got 30 left...oroginal 8500 accepts the assignment my 120 shares worthless, lose 4620...but still got $30 to get drunk with.. can't do any worse than that.. risk of stock dropping is the basic risk of equity markets... say stock goes flat @ 38.5...my 221 shares bought with my 8500 still par....my put assigned 8500 out....i get 100 shares in return...i've bought about 120 with the premium...so i have 220 shares with a cost of 85...not much difference...down/flat risk no more than long. lets say i luck out stock at 65....my 221 shares now worth 14365.. my put expires worthless..so 8500 still mine...my 120 bought with the premium worth 7800..so i end with 16300...a bit better than the long with same risk.. we agree and i concur with your analysis...but the tasty part is... i parlay up, it's a dynamic..much as a margin user does...but the strategy gives you something for nothing, unencumbered long positions...and as the time erosion kicks in the put premium drops..you can roll a profitable position to a same strike further out and accrue more capital to go long...it's a reverse margin concept...real life just closed 10 sunw0055 @ 1.875, against a 17.5 premium set 10/21/97 and 32 dell oo21.25 @ 1 against a 4 premium set 5/19/98(split adjusted...not worth tying up capacity for eight months...erosion kicked in..reset 25xdell may 50 @ 8.5 on 3/17/99...net to cash about 15k...no more exposure for an assignment but more cash to go long with.. the trick is only to do this with issues that you are intimate with, that you own or want to own...for me dell,intc,emc,msft... it gives you the ability to grow your portfolio with unborrowed money(i like you have a disdain for margin)..accumulate 30-40k shares and scalp deep calls every month for .25 or so...not a bad cash flow method... please go over it...i may be delusional...it hasn't caught up to me yet...my portfolio grows, my capacity increases...and no margin...takes a bit of effort...but gives me comfort.. get some rest...and analyze with a vengeance...ed a.