DGI Adventure – 06-30-16 Sold Covered Call – Microsoft Corporation (MSFT) – $51.50 strike – Aug 5 Expiration

I actually made this trade on Tuesday 6/28. I didn’t get a chance to write about it until today.

So at the beginning of the month, I sold a put contract for MSFT. The contract had a $50.50 strike price and expired on June 24th. Between management deciding to blow $26B on LinkedIn, and the people of Britain committing economic seppuku, shares were trading well below the strike at the closing bell that Friday, so I got assigned.

Momentum shifted drastically on Tuesday, and MSFT really bounced back. I was a little worried it might be a “dead cat bounce” so I decided to take advantage and sold a call option covered by the 100 shares I now own.


MSFT 1 Month Chart – June 2016 – Courtesy Yahoo Finance

I received a premium of $0.89/share less a total of $0.79 commission for a total of $88.21. Using the $51.50 strike price as the denominator (which is what’s “at risk”) this represents a 1.71% absolute return. Since the trade is only in force for 38 days, that equates to a 16.45% annualized return.

If assigned, the sale would net a capital gain of $1/share or a 1.98% absolute return on my cost basis of $50.50. Since I technically took ownership of the shares on Friday, 6/24, I would hold the shares for 42 days, which means my capital gain is another 17.2% annualized.

If the shares don’t get assigned, I will probably wait a few weeks for MSFT to go ex-dividend (8/16/16) before I sell another call. I don’t like getting assigned early, but if the yield available is really juicy, who knows?

I’ve added a tab for MSFT to my dividend income tracker.

In hindsight I could have waited till yesterday to sell this call, and I could have gotten a much higher strike and/or premium. Oh well. Thou can’t time the market, so thou shalt not try to.

Today is the end of the month. Last chance to make a little bit more income. If VLO has a big day, I just might sell a call option on those shares as well.

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