Javascript DHTML Drop Down Menu Powered by Drop Down Menu
FullyInformed.com - Options and Stock Strategies For Income

SignUp For Updates 

  You are here:


Bookmark and Share

 

 

 
Put Selling
Why Sell Puts
Example Trade- Selling Puts
Tools For Picking Naked Put Strikes
Selling Puts Is Superior To Covered Calls
Understanding The Naked Put
4 Basic Rules For Selling Puts
Selling Puts For Profit & Avoid Assignment
Caterpillar Naked Puts
Put Ladder On Barrick Gold Corp
Rolling Put Options Strategy
Covered Calls
Earn 3% With In The Money Covered Calls
Rolling Covered Calls Down
Staying Positive
Other Strategies
Moving Averages On Cisco Stock
Writing Uncovered Calls
Long Straddle
Miscellaneous
Importance Of A Plan, Goal & Objective
Early Warning Tools
Understanding The VIX Index
The Cautious Bull
Averaging Down In Stocks
"Squeaker" Option Trade On JNJ
Dividend Stocks That Cut Dividends
Hedging Downturns With SPY Puts
Defensive Stock Investing
Moving Averages Trading Strategy
My Strategy Explained
Rescue Strategies for Bank Of America
 

 

June 17 2011  / Microsoft Stock - Stock Symbol MSFT (Nasdaq)

Microsoft Stock Options

Continuing The Put Ladder

 

3 Years Of Selling Puts

Microsoft continues to perform well. After 3 years of selling Microsoft options, today's option expiry allows me to extend the reverse put ladder on Microsoft. The advantage of the reverse put ladder is to bring in more premium and all the while selling the put strikes out of the money, but still earning decent premiums due to selling puts far enough out in time. As well should the stock fall, there is a very good chance that only some of the puts may end up in the money, allowing me to continue to roll my puts further out and down.

The Reverse Put Ladder Explained

For example, with options expiry today, I bought and closed the June $25 puts and June $24 puts for profit. These puts were part of the previous put ladder options from previous months. Meanwhile the options ladder remains intact as I am still holding puts for July at the $23 strike and October at the $21 strike. That left a whole in the options ladder. Therefore as August didn't have any puts sold, I sold puts in August at the $23 and $22 strike. When July options expire I will continue the ladder option and sell September put strikes. The August puts I can roll into November or December. The further out the puts go the lower I can stay with my strikes. This is the beauty of the reverse put ladder. (its called reverse as I am moving down not up with my strikes).

Looking at the chart below you can see that I am now holding puts at the lows for the last year and below those lows. In my comments on May 23 2011 I indicated the $24 strike is probably a pretty decent strike to consider long term. By staying just below $24, I know that if assigned I will be holding shares at the low for the year which should give me a very good chance in a sell off, that the stock will eventually recover to the $24 strike.

 .Microsoft Stock Chart - Last 12 months

 

Rolling My Deep In The Money Puts

Today I also rolled my July $27 puts. The reason for doing this is because with the stock at $24.00 and just 1 month to go I may find that the stock is assigned to me before I want to take possession. By rolling now I avoid that or if assigned after rolling, at least I have earned more income from the roll

Meanwhile though usually I roll out and try to reduce the number of put contracts with that roll. Unfortunately I was unable to roll out and reduce the number of contracts from 6 puts to 5 puts without taking a net debit. Therefore, instead I rolled out to January 2012, but lower to the strike of $26.00 with the same 6 contracts. This resulted in a saving of 6000.00 in capital since I rolled down 1 strike and gave me a net credit. It also lowers the strike so this $26 now remains the top rung of the ladder.

SUMMARY

Because of the put option ladder, I am able to stay out of the money, reduce my cost basis in the stock and continue to bring in more income with every trade. Microsoft stock remains an excellent option trade and since starting this short put strategy, I have earned double digits annually for the past 3 years.

 

 

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

 |  site map  |  privacy policy  |  contact me  |  subscribe  |  exchange links  |  the author of fullyinformed  |