Wednesday, April 29, 2015
Willing to lose MSFT
Several $50 covered calls have expired and I am willing to try that strategy again with my remaining shares of MSFT.
MSFT July $50 strike price analysis
I prepared two tables below that show the gain from selling calls on those final shares if they are called away. Also if they are not called away, I will supplement the dividend income (which is only about 2.5%) with covered call income.
The second table shows that to do this trade today, using today's cost basis, is not very lucrative. However, that trade would deliver nearly a five percent gain in just 79 days if the stock is called away. If it is not assigned, then you get a dividend stock upon which you can sell future covered calls.
Consider this strategy for positions that have appreciated and provide minimal dividend yields but have covered call potential.
Disclosure: Long MSFT with calls