Advanced Micro Devices Inc (AMD)

[dougSF30]

Alan,

You are simply wrong. I don't know what more I can say...

Perhaps an example will help you?

Take $10,000.

Choice A: Invest in Stock XYZ (currently trading at $50, no dividend). Buy 200 shares. Kick in commission of $20, say.

Choice B: Sell 2 XYZ Jan 2006 Puts @ $800 per contract (gain $1600), Comission of $20. Buy 2 XYZ Jan 2006 Calls @ $900 per contract (Cost $1800). Comission of $20. Earn 2% on the remaining $9760 you leave in the account, more than fulfilling the margin req.

Let's run way out on the curve, to see if there are any non-constant factors:

XYZ goes to $300 one year later:

A: you have $60,000

B: Puts are worthless. 2 Calls are worth $25000 ea., giving you $50000. Money you had set aside: $9760 + 2% = $9950. Total $59950.

Economic arguments, arguments about summing over arbitrary collections of positions are not relevant. The return graph is substantially identical.

This will be my last post on this subject.

Doug