Re: [RT] conservative?

["Alexander Levitin" <alevitin@xxxxxxxx>]

Thanks,

You are right, I am wrong.

Confused Alex.

----- Original Message -----
From: "Levent Erbora" <erbora@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxx>
Sent: Monday, January 22, 2001 9:32 PM
Subject: Re: [RT] conservative?


>
> ----- Original Message -----
> From: "Alexander Levitin" <alevitin@xxxxxxxx>
> To: <realtraders@xxxxxxxxxxx>
> Sent: Monday, January 22, 2001 9:31 PM
> Subject: Re: [RT] conservative?
>
>
> >
> > ----- Original Message -----
> > From: <MikeSuesserott@xxxxxxxxxxx>
> > To: <realtraders@xxxxxxxxxxx>
> > Sent: Monday, January 22, 2001 9:14 AM
> > Subject: AW: [RT] conservative?
> >
> >
> > >
> > > The other point I wanted to bring up - why use a synthetic position at
> > all?
> > > Suppose your position size was
> > > long 1000 shares at 52 1/2,
> > > short 10 May 55 calls at 13,
> > > long  10 Feb 50 puts at 9 1/2,
> > > resulting in a capital outlay of nearly $ 50,000. This capital will
not
> be
> > > available for trading until you unwind your position. Why not use this
> > > totally equivalent position:
> > > short 10 May 55 calls,
> > > long  10 Feb 50 calls,
> > > which might be done at nearly even money (if you entered this position
> > now,
> > > you could even obtain a credit). The capital requirement would be
> > determined
> > > by the SPAN margin for the position, as of today some $ 23,000 minus
the
> > > credit of about $ 4,000 which means about $19,000 of your capital
bound
> in
> > > this trade, as compared to almost $ 50,000 for the synthetic variant.
> > >
> > > Regards,
> > >
> > > Michael Suesserott
> >
> > Dear Michael,
> >
> > The day after you enter into your uncovered short call position, the
> > previous boyfriend of your current girl annanced takeover of the company
> at
> > $1000 per share. What are you going to do then?
> >
> > Scared Alex.
> >
>
> He would probably thank the previous boyfriend and head to the bank with
> close to $5000 in his pocket and the girlfriend in his arm. Alex, I guess
> you were so scared that you misread what Micheal had written. I don't see
> any "uncovered short call position" there.
>
> Regards,
>
> Levent
>
>
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