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By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not access or use this site.
Nothing presented is financial advice, trading advice or recommendations. Everything presented is the author's ideas only. The author accepts no liability for its use including errors and omissions. You alone are solely responsible for your own investing and trading. There are considerable risks involved in implementing any investment strategies and losses can be large. Trade at your own risk.

 

 

 

Apr 6 2011 / Microsoft Stock Symbol - MSFT

Microsoft Stock Analysis

Selling Microsoft Puts Is Better Than Gold

   
 

How Microsoft Stock Returned 33% Annualized Each Year For 8 Years

None of the figures below take into account inflation. This is a simple calculation.

In April 2003 gold was trading at around $325 US an ounce. Today (April 6 2011) it is around $1455.00 - This is a 347% return. If I had invested $10,000 in gold at $325.00 US an ounce and cashed out today I would have a total of $44,028.30 which includes the return of my initial $10,000.00. Annualized this is a 20% gain or an incredible total return of 340%.

However unlike selling stock options, it would be difficult to have cashed out each month or year my gold investment and reinvested the earnings into gold as the price fluctuates greatly making cashing in and out a difficult strategy. Therefore it would be very hard to have compound returns with gold, but this is not the case with Microsoft Stock where when put options expire or are closed, the income is immediately available for reinvestment. This is the beauty of selling options on any stock. Each time the trade ends the capital is released. It grows monthly and the cycle is repeated. Let's look at my Microsoft Stock Analysis to see the returns from my Microsoft trades.

Below you can see the terrific return on Gold over the past 8 years. The chart tells the entire story. Gold has been an excellent investment as long as the investor stayed invested and did not cash out during those periods when gold went nowhere or declined. But what about a seemingly "no-go-where" stock like Microsoft?

Gold chart 2003 to 2011

 

The chart below shows my Microsoft stock trades over the same 8 year period - a 33% annualized return and a total gain of 925%!

Microsoft stock - Selling puts from 2003 to 2011

The Microsoft Stock Analysis of my trades shows that if I had made just 1% a month with Microsoft options over the course of 8 years and took my earnings and reinvested them quarterly back into selling more Microsoft puts, I would have $62,776.00 at the end of 8 years. Despite earning just 1% monthly selling put options, the compounding effect creates a 25% annualized return. (See the top half of the chart above labeled "Microsoft -  Puts")

 

However my actual earnings were higher at almost 20% a year. So when I take the same $10,000.00 I now would have $102,537.86 or annualized it is a 33% return. (See the bottom half of the above chart labeled "Microsoft - My Earnings")

Even earning just three quarters percent a month and continuing to reinvest the earnings from selling puts returns 24% annualized. (See chart below)

Comparing earnings

The purpose of this Microsoft Stock Analysis is to show the potential earnings power of selling put options even with a small starting investment and how over time if those earnings are allowed to grow, selling puts are not only a superior investment, but they also offer more income potential than investing in gold. As well over the 8 year period it offers a true annual return not a return such as in the case of gold, which can languish for years while waiting for price appreciation, or in the case of a stock, stock value appreciation. With selling options, the income is deposited to my account the day after the option is sold. My earnings are immediately credited to my account.

I believe options offer greater potential for consistent profits than simply buying and holding stocks or commodities and either gathering the dividend, or in the case of gold waiting for a crisis to push the valuation higher. This is why I have stayed with the strategy of selling options against large cap, quality, dividend paying companies. Over the long haul I don't need to chase stocks, consider the latest stock tips from hundreds of newsletters and analysts, jump into whatever is the hottest stock for the season or look at "too good to be true" investments.

Instead I spend my time examining a handful of large cap stocks that are leaders in their field, have solid earnings and a nice trending chart like Microsoft  Doing studies such as this Microsoft Stock Analysis have always been my keys to success.

 

You can view the last three years of my ongoing trades in Microsoft here.

Related Articles:

Purchase Microsoft Stock - The Ultimate Utility Stock.
The Microsoft Stock Report

 

 

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Microsoft Corp  
Trades By Years
View MSFT-2011 Trades
View MSFT-2010 Trades
View MSFT-2009 Trades
Microsoft Articles

In The Money Covered Call
Trade Anatomy
Puts Better Than Gold
Ultimate Utility Stock
Put Ladder
Microsoft Stock Report
Using Moving Averages
 

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright 2008

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