How Dell's strategy worked: It entered into complicated options transactions that assured ita lot of money if the stock rose and that would cost it dearly if shares fell. To get a bit more specific, it bought call options, giving it the right to buy Dell shares at a preset price. It got the money to buy those options by selling put options, which gave the buyer the right to sell stock back to Dell at preset prices. The strategy worked well when Dell's price was rising, but now it is costing Dell a lot.
The possibility that the budgetary items known as derivatives represent a risk to the money related framework is just the same old thing. Observers have been guiding this out for quite a long time. Most broadly, Warren Buffett alluded to derivatives as "time bombs" and budgetary "weapons of mass demolition."
