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

To: edamo who wrote (111936)	3/24/1999 8:04:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

edamo, I will when I'm fresh. Right now I'm bushed! The brain has slipped a cog or two. TTFN, CTC

To: edamo who wrote (111936)	3/24/1999 8:10:00 PM
From: Marq Spencer	Read Replies (1) \| Respond to of 176387

ed, You wrote: 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.. This analysis is flawed - the put does not expire worthless. You have to take 100 shares at 85 when the current value is 65. So you have to subtract $2000, which gives you 14300 compared to 14365 - a wash. See my earlier post Message 8505279 for a more detailed answer. - Marq.

To: edamo who wrote (111936)	3/24/1999 9:05:00 PM
From: PAL	Read Replies (2) \| Respond to of 176387

edamo: ref selling Dell jan01/85 puts 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.. you and chuzz are both tired. I just highlight where it shows you need a rest. Have both of you been wondering how the premium for 85 put is set at about 46? and that when you calculate either way, selling puts or just buy outright, the return/loss are about the same? when I have time, I will analyze it as well because it is intriguing. where will the time premium factored in etc. in late may I will be taking a class for advanced option seminar, and probably get more insight of how the you can project the premium. regards paul

To: edamo who wrote (111936)	3/24/1999 10:49:00 PM
From: His Pinkness	Read Replies (3) \| Respond to of 176387

edamo: The problem I have with selling puts to open is that my broker, Fidelity, has a margin requirement for those puts. The amount of margin required varies, but is a minimum of 1,000/contract. If I sell 10 puts, the minimum held in margin is 10,000. Usually, though, the margin is more like 1,250 to 1,500 per contract. I am still capable of obtaining an annual return of 100%, but it seems that you are capable of obtaining a higher return by not having a margin requirement. Where do you trade?

To: edamo who wrote (111936)	3/24/1999 10:54:00 PM
From: SecularBull	Read Replies (2) \| Respond to of 176387

edamo, my only concern with your plan is that you're more or less locked into the position over a longer period of time than if you sold shorter term puts. It kind of marries you to the position. Am I making sense? LoD

To: edamo who wrote (111936)	3/25/1999 12:10:00 AM
From: Mark The Trader	Read Replies (1) \| Respond to of 176387

Edamo, When you sell a put you do have margin requirements , basically they make you hold in your account cash that is equally to some percentage of what you would have to expend if you were put the stock. The cash is held in your margin account but does it earn interest?? I cant remember ,I have not done naked puts for a while but I do like the concept :-} Mark

To: edamo who wrote (111936)	3/25/1999 12:17:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Okay, my brain is back in gear. A few cups of coffee makes all of the difference in the world. The problem becomes so simple in the morning. The risk you have in selling a put is limited to the difference between the striking price and the premium. The risk you have in buying a stock is limited to the purchase price of the stock. In this case the risks are additive because you have placed all of the premium in the stock. Therefore your risk is equal to the striking price. Your cash position at expirey is a line with a discontinuity at $85/share. At expirey, your position will be worth $2.25 * the lesser of the value of DELL or $85 plus 1.25* the greater of 0 or the difference between the value of DELL. But have you really gained anything? You have placed $8,500 at risk and effectively tied up 225 shares upto the striking price, beyond which your position has the characteristics of a 125 share long position. The use of margin (buying power) is a red herring. The issue is cash at risk. So I argue that if DELL should close below the striking price your position is better than simply going long 220 shares. But at expiration prices above the striking price the pure long position is better by a wide margin. The advantage in your approach is the ability to dynamically increase your holdings, but if you think about it, it is really no different than using margin with interest. Another problem with this approach is that there is very little time value in the option (because it is so deep in the money). Maybe I'm still confused, but I see the long position as better. While it is slightly riskier on the leg up to $85, it provides much greater return when price exceed $85. TTFN, CTC