Wednesday, July 20, 2016

Play the Microsoft news with a Call Option

Microsoft, MSFT, has been stuck in the low $50's for a while.  We added it to the 2016 Model Portfolio in February at $50.40.  We have received two dividends so far and if we still own it on 8/16/2016, we will get another one.

We also sold two calls.

One expired in May and another is due in August.  I think we will lose MSFT to the call buyer at $55 which is the strike price.  Total return has been quite nice.  If the call is exercised at $55, our return is 14.72%.  See the table below

The 2016 portfolio owns only 100 shares of MSFT, but in my personal portfolio, we own more.  Today, I will sell another call.  October $60 for $.77.  See the table below to see how the math works on this call.

M* MoneyMadam

Disclosure:  Long MSFT with multiple calls

Actual trade resulted in call premium of $.85