Chapter 3: Capital Gains

On Friday, June 15th, Peter, Alan, and Kathy exited the Orca Games headquarters in Bellevue. They carried a folder with a copy of their signed contract, offering the corporation exclusive licensing rights to the four games they created—with future endeavors to be negotiated when appropriate. Peter also held a $45,000 bank draft made out to PAK Gaming Co., bringing their gross capital to over $100,000.

“We never have to copy another disk!” Kathy sang excitedly, her arms locked in theirs. “We need to celebrate! Where should we go?” Her giddiness was contagious. They grinned and talked over each other about a suitable celebratory venue. Ultimately, they returned to their favorite Round Table pizza parlor and their regular booth. They spent an hour burning through quarters in the arcade, reclaiming their high scores in their favorite games. Then, they settled down to pick over the remains of several pies.

“What’s the big picture?” Alan asked suddenly, belching loudly.

Peter shared the specifics. They were 75% finished with the Dungeon Lords Beta version, and he projected an initial release date of June 31st for the Beta on the Gooney Board. “I don’t want to settle for less than 20% when negotiating licensing,” he said. They were receiving numerous orders but were told to bulk mail them to the corporate headquarters, unopened. “I’m setting aside 30% for corporate taxes, leaving us about $72,800 free and clear.”

“Do we have any projected expenses?” the Asian boy asked animatedly.

Peter regarded him shrewdly. “Nothing major. We don’t need to upgrade our burners since we don’t need copies. Are you suggesting a distribution?”

“I’d like to buy a car,” he replied. “I’ll have my license soon, and going anywhere I want will be nice.”

“Let’s vote,” Peter suggested. “All in favor of a $22,500 distribution?”

All three hands went up. Kathy’s eyes lit up as she produced the checkbook and made out the checks.

“Can you take me back to the bank to deposit this?” he asked his beauty queen.

“Of course, sir,” she replied smoothly, kissing his nose. “I got big plans for mine.”

“Oh?”

“Hell yeah! I’m gonna get my Camaro!” she laughed, dancing excitedly in her seat.

“I thought I was buying you a Camaro,” he replied glumly.

“Pfft!” she scoffed. “I’m an independent woman, son. I can buy my own damn Camaro.”

The next day, Peter moved most of his checking account balance to his E-Trade account, adding $70,000 to his capital. With just under $310,000 in cash, he planned his next options play. As with Oracle, he was fixated on Hewlett-Packard’s sudden decline. The Saturday IBD showed it hit a 52-week low at $29.65, 30% lower than the $43.50 high two months previous—yet they still maintained the highest accumulation/distribution rating of A. Believing in their reliable peripherals and market share, he thought this drop was a fluke or pressure to undervalue it. He reviewed their financials and SEC filings and found only one red flag: they missed their previous earnings estimate by a wide margin.

He began analyzing the option strings to understand the spreads and open interest. He recalled a stock trend he had read about during his hospitalization called a ‘dead-cat bounce’ and felt HP would soon reach a level unsustainable for further downward pressure. At that point, he was confident it would quickly correct itself. He considered its April high of $43.50, and the Calls he was interested in were:

SEP 35 C $11/8 ($112/contract) open interest 695

SEP 40 C $2¼ ($225/contract) open interest 1300

SEP 45 C ¾ ($75/contract) open interest 12

The December 40 Calls he was closed out of had dropped to 2½ with an open interest of 102.

After reviewing his notes and pausing for a third coffee, he logged into his portfolio and placed orders for 250 SEP 35 Calls, 250 SEP 40 Calls, 600 SEP 45 Calls, and 250 DEC 40 Calls. His bullish gambit depleted his cash reserves by $192,000, leaving him with $118,000. Since AMD was his cheapest stock at $11, he ordered 5,000 more shares, doubling his holdings. He had $63K left.

Kathy stayed at her place that evening, and he felt lonely waking up without her. But she promised to see him that afternoon and stay the night if things felt right with his dad. By 10 am, he was bored and couldn’t occupy his mind with programming for his two projects. He went to the living room and plopped onto the couch to watch TV. He was enjoying a Dr. Pepper and watching Bill & Ted’s Excellent Adventures when Roger finally came downstairs. He ignored his son and went into the kitchen to pour himself a cup of old coffee. Peter heard a pill bottle rattle and assumed he was washing down some aspirin for his hangover.

“No girlfriend last night?”

“Boy,” Roger growled as he collapsed onto the couch beside him, “Your mother brought a crackhead to her bed and wound up doing drugs and getting AIDS from the punk. Don’t judge me ... Got it?”

Touche: “Did you figure out what happened with the settlement money?”

Roger snorted. “Fuck no! I can’t believe they blew through it so fast—”

“When you do the math, it’s not hard to believe.”

“What’re you talking about?”

Peter turned down the volume. “Think about it ... a $40,000 Trans Am—seized in a drug bust, that kilo of smack cost about a quarter mil, the BMW was $35K, who knows what they did while I was in the hospital and rehab,” he waved his hand around the room. “All these renovations weren’t cheap...” He intentionally omitted the settlement details. “And they were in Vegas—”

His dad swore vehemently and got back to his feet. He mumbled incoherently as he headed upstairs.

“Hey, Dad?”.

“What?”

“Mom gave me $500 for groceries before the shooting.” He was glad his dad couldn’t see him struggling to keep a straight face.

“Yeah? So what?”

“I’m nearly out of money and was wondering if you could spare a couple hundred soon to keep the fridge and pantry stocked.” He tried to remain deadpan as he chewed on his lower lip. He had already made three $400 withdrawals with his bank card that week, building back the wad he’d given to his sister.

“Fuck! I’ll get you cash later when I head out,” he heard from the top of the stairs before the master bedroom clicked shut.

His cheeks became sore as he resisted grinning, but he couldn’t stop his shoulders from quivering with silent laughter.

The humor vanished when he glanced at the TV and saw a news clip. Reporters surrounded two familiar faces outside the Law Offices of Bale and Bale. He turned up the volume to hear his attorney, Scott Bales, expressing dismay at Judge Henry Davis for not recusing himself from a case involving his daughter-in-law. Scott was seeking an emergency injunction with the Superior Court in Olympia. The news clip was from the KING 5 Evening News the night before. After Scott spoke, the scene shifted to another block where reporters waited outside a business. The attorney-in-question appeared, tried to cover her face with a parcel, and offered no comment.

Damn! This train is about to derail!

Kathy sat with him on the couch later that afternoon when Roger reappeared and headed out for his usual haunts.

“Don’t forget to bring me cash for groceries,” Peter said to his back as he stepped outside. He got no response and chuckled after the door closed. Kathy nudged him in the arm and giggled as she buried her face in his neck.

“You’re so bad,” she hummed while kissing his jaw and tracing her tongue across his ear. She felt him shudder and smiled at his response. “Guess what I did today?” she whispered seductively.

His breath caught as he savored the sensation of her warm breath and tongue on his face. “Wh ... what?”

She sat back with an excited bounce. “I went to the Chevy dealer and ordered my new baby!”

He turned to meet her exuberant gaze. “Whoa! Really?”

She nodded excitedly and grabbed his arm. “They’re painting it midnight blue, and I’m having my cousin Demarc put pinstripes on it and a tribal feather on each front quarter panel.” She touched her favorite earrings that jingled lightly whenever she turned her head.

“What did you get?” he prompted her.

“A Camaro fool!”

He rolled his eyes at her. “I figured that! Which one? RS? Z28? IROC—”

“Oh, it’s the Z28,” she grinned. “You wouldn’t believe what an ass that salesman was ... That’s why I took Uncle Dean with me. He has the shop in Spanaway,” she added when Peter lifted another eyebrow. He often teased her about her many uncles and cousins. “Hey, there wasn’t much to do on those cold winter nights in the 40’s and 50’s,” she explained. Her dad had seven brothers. He and two others went to Vietnam, but only he returned. The others were either too young or exempt from the draft because of the Sole Survivor Policy of WW2.

“Anyway,” she continued. “The dude was pitching the IROC model, which was $5,000 more, but Uncle Dean explained they were the same car with the same engine and performance.”

“When do you get it?”

Her eyes glowed with excitement. “They’re releasing the ‘91 models next month, and I’ll probably get one of the first ... I hope.” She got up from the couch and crossed the room like a runway model in her bare feet, checking the locked front door. Then she turned and eyed him suggestively as she padded towards his room. She shed her tank top, exposing her breasts.

Peter swallowed awkwardly and struggled to get up and follow her. By the time he entered his bedroom and bolted the door, she was lying nude atop his bed. She stretched like a cat, and his mind went blank as he mechanically stripped off his clothes before joining her. Even after months of passionate sex and post-coital snuggling, she took his breath away every time he gazed at her. He absently removed his ‘feet’ before crawling up to lay beside her, touching her warm skin.

She returned his look with an intense gaze he knew well. She craved his body. She grabbed his face and kissed him passionately. He sighed into her mouth, and she regarded him curiously. “You’re shaking, baby,” she commented softly as she wormed beneath him. “Are you okay?”

He shuddered as he pressed himself against her lower belly. “I’m still amazed ... by all of this,” he whispered.

“By what?” she asked as she reached down to caress him.

He shuddered again. “I can’t believe how lucky I am,” he replied, closing his eyes to savor her touch. “You are like a goddess; I’m just a mortal in your arms.”

She giggled lightly and kissed him. “You say the sweetest things,” she purred. “Now stop talking and give me that magic spear!” She took control and rolled onto her back, pulling him onto her. They made love for several minutes before climaxing simultaneously. Afterward, they lay together, sharing kisses and intimate touches.