The value of the holding on 8/17/01
Owns 1,800 shares of qcom plus $ 5,510 in cash:
1,800 times $ 61.56 = 110,808 + 5,510 = 116,318, giving a gain of 6,318 or 5.7%
At what level will buy/write start incurring a loss?
We started out with 110,000. Let "X" be that price of qcom:
1,800 X + 5,510 = 110,000 or 1,800 X = 104,490
then X = 58.05.
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Now we can compare the risk level (that is at what level will the loss start) for each strategy:
100% cash/short put : 54.30
Covered strangle : 56.175
Buy/write : 58.05
Therefore, 100% cash/short put has a lower level of tolerance in a down market. |
