Product details

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Authors: Jordan Posell
Published by: Darden Business Publishing
Originally published in: 1992
Version: 01.1999
Length: 15 pages
Data source: Field research

Abstract

A new ruling by the Securities and Exchange Commission has provided the International Business Machines Corporation (IBM) the opportunity to sell put options on its own shares. IBM''s assistant treasurer is considering the merits of selling puts in conjunction with the company''s ongoing need to repurchase its own shares to satisfy the needs of its Employee Stock Purchase Program (ESPP). The strategy under review is to use the income from the sale of the puts to offset the price of the shares repurchased each month for the ESPP. The student must assess the probability of the February 1992 puts'' being in the money and determine whether the risks of writing puts are sufficiently manageable to permit the writing of puts to become a viable, long-term strategy.
Location:
Industry:
Size:
USD65 million
Other setting(s):
1992

About

Abstract

A new ruling by the Securities and Exchange Commission has provided the International Business Machines Corporation (IBM) the opportunity to sell put options on its own shares. IBM''s assistant treasurer is considering the merits of selling puts in conjunction with the company''s ongoing need to repurchase its own shares to satisfy the needs of its Employee Stock Purchase Program (ESPP). The strategy under review is to use the income from the sale of the puts to offset the price of the shares repurchased each month for the ESPP. The student must assess the probability of the February 1992 puts'' being in the money and determine whether the risks of writing puts are sufficiently manageable to permit the writing of puts to become a viable, long-term strategy.

Settings

Location:
Industry:
Size:
USD65 million
Other setting(s):
1992

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