Phil Marti <prm20871[at]verizon.net> wrote:
- quote -

Microsoft stock is currently selling for $24.75. Options to
buy a share for $27 are selling for $1.70-$1.75. (They
expire in Jan. 2007.) The open interest is almost 50,000
contracts (for 100 shares each).

So there are lots of people who are willing to buy such
options.

Seth

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"Seth Breidbart" <sethb[at]panix.com> wrote:

- quote -

More likely that we drew different conclusions from the OP.
Although too speculative for my taste, I'm sure there are
investors who would, under what they saw as ideal
circumstances, buy an option to buy at $23 when the stock
was trading at $20. I'm not totally sure, though, that I
wouldn't like to talk to them about my bridge.

--
Phil Marti
Clarksburg, MD

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sethb[at]panix.com (Seth Breidbart) writes:
- quote -

Seth is of course correct. However, I interpreted the
original poster as talking about *exercising* options with a
strike of $23 when the stock was at $20, and then selling
the stock, in order to generate a capital loss. I'm sure we
can all agree that is an idiotic thing to do.

The OP's language is ambiguous, I admit, and I reproduce it
below:

- quote -

Since these are clearly employee stock options (as opposed
to market-traded options), I'm willing to bet "sell your $20
options" really means "exercise the options at $23 and sell
the stock at $20" because I've run across so many people who
talking about employee stock options say "selling my
options" when they really mean a same-day exercise and sale.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Ted Johnson <ted_johnson[at]hp.com> wrote:

- quote -

No. If you exercise them and sell the stock, you have a
realized loss. But that's a foolish idea.

Seth

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Phil Marti <prm20871[at]verizon.net> wrote:

- quote -

Me, provided the price is low enough, the expiry far enough
away, and the stock volatile enough.

One of us doesn't understand the concept of options.

Seth

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"Ted Johnson" <ted[at]estaff05.mayfield.hp.com> wrote:

- quote -

Who's the idiot who's going to pay for an option to buy a
stock at $23 (not $20) that he can get for $20 without the
option? Have him call me about this bridge I have for sale
through a quit claim deed.

--
Phil Marti
Clarksburg, MD

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ted[at]estaff05.mayfield.hp.com (Ted Johnson) writes:

- quote -

It's probably true. But who knows, because I don't see why
any rational person would ever want to do it.

You lose $3000 to save around $750. That means you still
*lost* (i.e. decreased your actual net worth by) $2,250.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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A colleague is claiming that underwater stock options can
actually be used to lower capital gains taxes.

Here's the scenario:
- let's say you work for Acme, Inc and were granted
1000 stock options, with a strike price of $23

- let's say the current NYSE stock market price of Acme is $20

She's claiming that you can sell your $20 options, and
take a "realized lost" of 3*1000 = -$3,000

Is this true?

Thanks in advance.
-Ted

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