When Is Cheap Borrowing Not Really Cheap?

Another problem Theodore W. Waitt,
GTW’s CEO, has to address is the company’s lack of diversity in
hardware offerings. Both Compaq
(
CPQ |
Quote |
Chart |
News |
PowerRating)
and Dell Computer
(
DELL |
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PowerRating) have far more
varied lines to fill the profit void that ruthless price-cutting has stripped
away. Presently, GTW shares are trading at a fresh 52-week low of $8.64 a share,
down 11 percent ($1.14).

Going the opposite direction are shares of Tenet
Helathcare
(
THC |
Quote |
Chart |
News |
PowerRating). In fact, things are so good for the healthcare
services company that you may think you were smoking their stock symbol when you
look at the dizzying run the company has enjoyed!

Now this morning, fellow TradingMarkets.com commentator Goran
Yordanoff and I were looking for low-risk plays to position for a
correction in THC. One possibility that interested us was selling
the THC October 55 — 60 call spread. Why? Well, if a trader thought THC
shares could see some profit-taking, or an outright correction, he could
potentially keep the entire credit collected (should THC fall beneath his short
55 call strike) and have only limited risk should THC continue on its merry way
upward, as he would have capped his exposure with the purchase of the THC October 60
calls. Done in a one-to-one spread fashion, the Oct 55s could be sold for $4.30
and then he’d pay $1.70 for his protective 60 calls. Thus, a potential profit of $2.60,
while only risking $2.40*

Be sure to watch Doctor J & the Traders
live tonight at 5:30 ET on www.webfn.com. The
show will be archived approximately two hours after the live version runs. Tonight’s
guests include: Goran Yordanoff, Larry Parkhill, Benji Schwatz and Greg Temel.