[TheOptionClub.com] Ratio Covered Call Writes on MSFT

 

Looking at Covered Call Ratio Writes on MSFT and wanting to get other thoughts and inputs.

Situation/Scenario is as follows:
1. MSFT currently @ $25.94
1. Want to retain stock and NOT have it called away.
2. Looking at either writing 10 Nov. 28's Calls (MSQKC) @ $0.70 OR
20 Nov. 29's Calls (MSQKX) @ $0.40
3. Buying 10 Nov. 30's Calls (MSQKF) @ $0.10

My thinking is as follows: By selling the 20 of the 29's I get more than double the money than the 28's (20 contracts X $0.40 = $800) versus 10 of the 28's (10 contracts X $0.70 = $700), and I have $0.10 to buy 10 of the 30's for some upside protection. I ran some comparison of the price of MSFT going up or down and the ratio of approx. 2:1 remains as long as MSFT is below $27.00.

The big item I see is that I have $1.00 more of upside protection to help having the options expire worthless and not having the stock called away, which is one of my goals, and the return is the same with some upside protection due to the $30's call buy.

Would appreciate other thoughts/suggestions. Am I missing a key consideration?

Thanks in advance.

Tony (aka: TexasTrader)

__._,_.___

Messages in this topic (1) Reply (via web post) | Start a new topic

Messages | Files | Photos | Links

The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com

Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

Recent Activity

•  16
  New Members

Visit Your Group

Give Back

Yahoo! for Good

Get inspired

by a good cause.

Y! Toolbar

Get it Free!

easy 1-click access

to your groups.

Yahoo! Groups

Start a group

in 3 easy steps.

Connect with others.

.

__,_._,___