Microsoft Stock – Put Selling The Earnings Miss

Microsoft Stock has been in my portfolio for many years. Microsoft stock symbol is MSFT and its trades on the NASDAQ. I have written a lot of articles about Microsoft stock and I certainly plan to stay with Microsoft Stock, but the technology sector that lead the market recovery from the crash of 2008-2009 certainly has begun to sputter. This could be signaling a change in market leadership or it could be just a slow quarter or two which investors are facing. Since I do put selling of Microsoft Stock rather than trade in the shares I have a lot of leeway when it comes to adjusting my positions going forward.

Microsoft Stock Naked Puts Positions

My present Microsoft Stock naked puts ranged from $28 to $26 and stretch from October through to January. You can view all my positions by through this Microsoft Stock link. This is a naked put ladder which means the strikes are spread out from high to low and when rolled can be rolled lower each time they are rolled should the stock warrant it.

Microsoft Stock Earnings Miss

Part of the reason I have been reluctant to sell puts higher than $28 is because after the earnings from Apple Stock, Intel Stock and others in the tech sector, I felt that Microsoft’s earnings would not meet expectations. The earnings announcement, that the first-quarter profits were 4.47 billion or 53 cents a share on revenue of 16 billion is not really a surprise to me, but based on the strength Microsoft Stock kept exhibiting these past three or four weeks a lot of investors seemed to feel that Microsoft Stock was going to rise on the earnings. Indeed I wrote a post recently about how I wish analysts stayed away from my stocks because as soon as they started talking about Microsoft Stock investors started buying it.

Last year for the same quarter Microsoft earned 5.74 billion which is 68 cents a share on revenue of 17.37 billion. The average analyst was looking for .56 cents but felt that revenue would be 16.5 billion. Now part of the loss could be attributed to the fact that Windows 8 does not come out until Oct 26 and therefore perhaps a lot of investors were holding back. Personally I am not convinced. Overall there is a lot of competition in the technology operating system and business software sector and Microsoft which still dominates, probably has the most to lose among tech companies in that sector. Meanwhile though the bright spot remained with their gaming business where the XBOX and Microsoft online gaming remains the leader.

Microsoft Stock Good News

The good news for Put Selling is that the earnings miss should push volatility higher in Microsoft Stock and make put premiums more expensive. This means rolling naked puts will be more profitable adding additional income to my portfolio.

Microsoft Stock – My Next Move

I realize for people holding stock who bought it above $29, may have visions of Intel stock and its recent decline in their heads. Therefore there will be selling on this news. I am holding $28 strike naked puts for October, November and December. I expect the October $28 should expire but after hours the stock was already falling below $29 so I will have to see how Microsoft Stock is in the morning.

My November and December naked puts will be rolled out to $27 and $26 respectively.

I am expecting that Microsoft will set up a new trading range back in the old trading range from 2010 – 2011. In the chart below you can see where I will be Put Selling in the coming months.

Microsoft Stock Trading Range

I am expecting a new trading range for Microsoft Stock

Put Selling Microsoft Stock Summary

The rolling of my naked puts will occur probably tomorrow. Meanwhile this could be a blip on the earnings front and Windows 8 could possibly turn the money-making Microsoft stock chart around in the next quarter. But until I see those earnings it is better for my portfolio and Put Selling strategy, to stay within the trading range as per the chart above. This is one of the advantages of the put ladder. I am already trading many positions within that range, so this will be an easy transition for my Microsoft Stock Put Selling ladder.

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  • Teddi,
    In your article above you indicated you are rolling your current positions out and down to the NOV $27 and DEC $26 strikes. Would you enter a new trade in MSFT at those same strikes right now or would you wait to see if support holds at $28 before entering a new trade?

  • I will be scaling into those positions on down drafts. I see no reason to rush but at the same time if investors push MSFT down for a day such as today I like to take advantage and sell a few out of the money puts just to snag premiums. So in summary – no rush – but take advantage of plunges. Troy also I don’t mind buy them back if the stock bounces back and I can do the trade again. In other words I sell the $26 naked put and the stock moves up and I can close for a profit and then repeat the Put Selling again.