Monday, March 23, 2020

Extraordinary call on MSFT I had to sell

These are strange times.  I had more than 20 calls on 20 stocks expire on Friday.  Today I searched each and every name where I am above my cost basis.  I was looking for extra call income.

During the past few weeks I added little bits of MSFT for a basis of $140.  On those shares I am barely even as MSFT is trading in the mid $134.   However, I found an extraordinary call that I sold today.

Price on Open Call Expiration 
MSFT $133.83 6/19/2020
Cost Basis:   March $140.00
Strike Price: $155.00
Call Premium:  $7.07
Dividend  5/20/2020 $0.510
Call Yield on Basis 5.05%
Call + Dividend Yield on Basis 5.41%
$ Gain if Assigned $22.58
Max Return  if Assigned 16.13%

If my shares are called away, I benefit to the tune of over 16%.  If MSFT stock price soars and I lose it before the dividend date, that is o.k. by me.  If it rumbles along at the current price level, I will probably not lose it and will capture the dividend.  I am fine being long MSFT but I am also fine having this lot called away when I get the unbelievable premium of $7.07 per share.

The premium on this call is equal to over 13 quarterly dividend payments.  As an income investor I have to do this.

Analyst moves MSFT

M* MoneyMadam
Disclosure;  Long MSFT with calls on part of the position.