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Technology Stocks : Safeguard Scientifics SFE -- Ignore unavailable to you. Want to Upgrade?

To: michael r potter who wrote (2869)	5/18/1999 5:29:00 PM
From: Tom Bunge	Read Replies (2) \| Respond to of 4467

Mlichael, there's been a lot of interesting talk about options today. I would like to get your opinion on one particular option strategy - especially in view of your comment ... "Most would be best served by buy and hold, at least if the past is any guide. IMO, most [but not all], should stay away from options in any form, because the learning curve can be quite expensive in the long run ...". Let's assume you see SFE going up over term and wish to accumulate a significant long position over same term. Assume you are still at $45-55 per share and want to invest $100,000 over time (in this case, time has proven to be limited). You may buy 2000 shares upfront or you may buy 5000 share quasi-equivalents with (way) deep in the money calls (say strike 30); this may reduce your risk (I am not sure what the right balance between shares and calls would be to achieve optimum risk reduction) and certainly allows you to build your position more rapidly, given a limit on cash. As far as cost is concerned, I found the time premium to be almost non-existent in deep calls (bought SFE May 35 calls at a premium of 20 when the share was at 55); the price relationship has held pretty well; I then converted to Aug. when the May maturity approached and am willing to roll them over to November if/when required. The alternative would have been to go on margin, which I don't like so much and has greater limitation in amount, anyway. Perhaps when I need to buy the shares to get IPO rights, I will go on margin. My question: This strategy has seemed to work pretty well so far; at any rate, by the time I need to fully convert into shares, I will control more than the 2000 shares I could have bought initially. Am I missing something? Would'nt you agree that that options, used in this - I admit - rather non speculative way, is an attractive manner of accumulating? Am I missing something? If you see a major shortfall, pl. advise! It's still time to get out! Otherwize, I would be interested to get your comments on the method - in general. Thanks for your advice; that of any other member on this board is welcome alike.