Microsoft Stock is falling lower on this half day of trading which opened this opportunity for the first trade in the Retiring Easy Portfolio for July.
The Latest Lows
Over the last 180 days, the lowest close was $222.31 on Jan 5 2023.
The 52 week high was $351.47 on June 16th (2023). Microsoft Corporation is trading 4.2% below its 52 week high.
Over the past 90 days the lowest close was around $313 and I am just above it at $315.00
Protection
This trade has 6.4% protection which is in-line with the trade done June 30 in this portfolio.
Trade Setup Comments
This trade has 10 credit put spreads.
I wouldn’t chase the put premiums. I would place an offer for 90 cents to $1.00 and leave it there for the rest of the day or into the next trading day. Even spreading out offers is a strategy worth considering. Any investor worried about the stock or the market should not enter this trade as investors tend to make mistakes when nervous and take losses. Staying in cash during periods of uncertainty is never a wrong strategy to take although I do think we will see markets rally into mid to end of July.
Microsoft Stock (MSFT) Trade Setup
TRADE SUMMARY: Credit Put Spread
Equity: Microsoft Stock (MSFT)
Approx Price At Entry: $336.60
Expiry: Jul 21 2023
Next Earnings: Jul 24 2023
Potential Profit: $810.00
Potential Return: 1.8%
Approx. Percent of Protection: 6.4%
TRADE DETAILS:
Short Puts: Sold 10 put contracts for Jul 21 2023 expiry at the $315.00 put strike for $0.90 = $900.00
Long Puts: Bought 10 put contracts for Jul 21 2023 expiry at the $270.00 put strike for $0.09 = ($90.00)
Spread Details: This forms a $45.00 credit put spread returning 1.8% earning $810.00 if held to expiry on Jul 21 2023
Buy To Close Early Offer: I am offering $0.37 to start and will reduce that amount as the trade moves toward expiry on Jul 21 2023
TRADE STATS:
Put Strike Sold: $315.00
Potential Profit: $810.00
Potential Return: 1.8%
Credit Put Spread Size $45.00
Approx. Percent Of Protection: 6.4%
Equity Would Have To Fall To Reach Short Put: $21.60
Capital In Use: $45,000.00
Comments and Concerns:
If you are concerned that the stock and markets will fall, not entering this trade is a good idea.
Remember, I keep offers to buy to close early open the entire trade and adjust them as the stock moves.
If entering these or similar trades, scale positions to the size of your portfolio and/or to the level of comfort you prefer. A nervous investor would place a smaller trade while a more aggressive investor may choose to increase the size of trades taken. It comes down to personal choice and how much risk to capital being used. I am not a financial planner and have no financial accreditations. You always trade at your own risk. There are no guarantees in stock trading. Remember I always place an offer to buy to close early and leave it open throughout the trade, adjusting it as the trade progresses. As well, in a market sell-off, consider placing a stop-loss at a price point where you would want out of a trade.
Consider a Stop-Loss
For investors who would not own shares or not want to roll a position forward, a stop-loss is an idea to consider in a market sell-off. This strategy sets up how much of a loss an investor is willing to take before getting out. For example, if a put contract was sold for $1.00 an investor might be willing to take a 50% loss. The stop-loss would therefore be set at $1.50. If the put contract reaches $1.50 then the investor is “stopped” out, locking in a loss but also limiting the potential for further losses if the stock continued to fall further.
Comments:
Remember, I check the Put Options Selling Tool Analysis daily for this stock and watch for a change in trend. If the trend changes I usually buy back the short puts but hold the long puts for a couple of days just to see if their premium will increase before selling them. Click here to review the latest Put Options Selling Tool analysis for Microsoft Corporation.
Questions? Use ASK TEDDI
Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. You always trade at your own risk. The Retiring Easy Portfolio is designed for entertainment purposes only and not financial advice or a recommendation. It is designed to study whether an investor could augment a pension through a handful of trades each month to live comfortably in retirement years. Remember there are risks involved in every trade. Trade only within your level of expertise and comfort zone. Read the full disclaimer.