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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (30543)	5/24/1999 10:48:00 AM
From: Sun Tzu	Respond to of 70976

OT -- Synthetic buy backs Though the amount and the total time span of the buy backs is approved by the board, its implementation is left to the corporate treasurer. So rather than buying a big chunk of stocks as soon as the buy back is approved, the companies either buy a small chunk and lower their cost by selling (far?) puts (i.e small quantity--long time span) or buy a lot of near calls and sell a lot of near put (i.e. large number of shares -- short time span) and repeat the process through out the year. There are of course companies that do a mixture of these two approaches, or even never do a real buy back and maintain short bursts of synthetic buy backs (JNJ for one). But the gist of it is what I described above. Almost nobody in the corporate world commits to equity derivatives for more than 5 months. BTW, this is why I hardly ever hold on to options that expire in less than two months, and that my investment horizon for equities is always more than two months (often 4 months to a year). Sun Tzu