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

To: edamo who wrote (118352)	4/18/1999 12:03:00 PM
From: Jill	Respond to of 176387

I do understand! Jill

To: edamo who wrote (118352)	4/18/1999 1:52:00 PM
From: freeus	Read Replies (1) \| Respond to of 176387

Click next if you are uninterested in options. The more I do the more I learn. The more I learn the more questions I have. So. I sat down with a calculator this morning (Remember when Datek said to me, when I had used margin and called them to ask what it was, "Thats a unique approach most people ask before they use it") I didnt really understand selling puts, from the broker's point of view...and wont understand it completely anyway because their formula is hopelessly complicated. However: Assuming I like DELL, CMGI and AOL. (I do like them). Assuming I think they are going up so whatever I do will reflect that. Right now Fidelity is holding $75,000 from my margin capability. So if I had that $75 000 and no puts this is what I figured out. That $75,000 is the result of selling 7 CMGI puts. I could clear a profit, should those puts go down to 2, of $30,400. Now suppose instead I put that $75,000 into DELL. Assuming a price of $40 I could buy 1875 shares of DELL instead. I think DELL will return to its high of 55 this year. That would be a profit of $28,125. So the profit on the CMGI puts is higher, because in addition I have an interest cost on the Dell bought on margin of approximately $5250 which I have not figured in. (And no margin interest with the CMGI puts.) If I sell DELL puts instead of CMGI puts it doesnt work out as profitable for the puts side of it. Now suppose instead of buying DELL with that $75,000 I buy AOL. Assuming I pay about $140 for it I can buy 535 shares. Assuming AOL will go back to its high of 175 this year and surpass it to reach 200 as I believe it will, I make $32,100: however I still have not figured in the interest on the debt, if I do that the put selling still earns more. And no danger of a margin call. So its looking pretty good for the puts selling. Have I left out important points? Dont argue with the 55 price for DELL and 200 for AOL: there is always the risk we are thinking wrongly about our stocks, that's just life. I dont intend to change from stocks to Treasuries in this lifetime. (Maybe next life I'll be a timid cautious bank account type who knows, but not this time). Freeus