UnThreaded | Threaded | Whole Thread (71) | Ignore Thread Prev | Next
Author: 1000 Big funky green star, 20000 posts Top Recommended Fools Feste Award Nominee! Coverage Fool Supernova Phoenix 1
Mission Team Member CAPS All Star SN Explorer 1 Mission Team Member Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10416  
Subject: Re: Getting Paid While You Wait Date: 6/3/2003 4:44 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Hi XfatOx,

The downside is simple: the possibility of being forced to pay more for the stock than it is worth. Maybe a really, really simple example will be able to express this.

But this is the same risk you take when you buy the stock outright.

This returns annualizes out to 6.6%. This is definitely not worth taking the risk. Naj can check my math. Compounding the returns is the only way to make sense of the example.

So, I think I see what you are saying. The return from the option must be worth as much or more than your expected return on the underlying security. I agree with this.

It is my opinion, Jeff also agrees with this and considered it a given. However, I now see your point that this would have been an added issue to discuss.

Am I following your logic now?

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (71) | Ignore Thread Prev | Next


Post of the Day:
Saul's Investing Discussions

China's Stock Market: Like the Lottery?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.