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Warner Chilcott plc Message Board

  • felizhora1 felizhora1 Aug 24, 2010 11:39 AM Flag

    Consider the margin gain.example.

    You buy pay 1000 sh put $8500 0n margin.Div covers margin and yes stock will adjust but your off margin and have WCRX 100% owned for the future growth gain which looks strong.WCRX could easily get back to $30 in 1or2 quarters.

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    • <<You buy pay 1000 sh put $8500 0n margin.Div covers margin and yes stock will adjust but your off margin and have WCRX 100% owned for the future growth gain which looks strong.WCRX could easily get back to $30 in 1or2 quarters. >>

      But, if I'm understanding your margin buy correctly, what did you really gain by buying on margin? Consider the following scenario using PPS rounded to make calcs easier: You buy the 1000 shares at 28.50, using $20k cash and $8.5k margin. On Sept. 8, you collect the $8.5k divvy (and your margin is paid off), and on Sept. 9, the stock goes back down to 20 (plus any divvy run-up that's occured). Your gain was only the divvy run-up, less the margin interest paid on the $8.5k.

      If you paid all cash, you'd have the whole divvy run-up. (Of course, maybe you could buy 25-30% more shares using margin than just cash . . .)

      If you're looking ahead to the next 1-2 quarters, when you think it will easily get back to $30, then why not just buy in the post-divvy drop, and save the interest, and save yourself the ride on the roller coaster.

      Just a thought . . .

 
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