Re-establish a position in ON and open a diagonal call in MSFT.
music selection: “Not Enough” — Van Halen
weigh-in: 199.0 +2.4 – oof! NO excuse.
A covered call on 500 shares of ON Semiconductor (ON) resulted in shares being called away over the weekend. I still love playing this company with options for income but I’ll be trimming exposure down to 300 shares. I opened a short put on the company this morning by selling ON190215P00017000 for 55 cents a share. The trade will be in force for a scant 25 days and yields an expected 47.24% on an annualized basis while enjoying 7.84% downside protection against a decline in share price. This has an excellent risk to reward profile to my eyes.
I have also opened a diagonal call on Microsoft (MSFT). I like the strong profitability and plump free cash flow of this mostly mature company. The company has a growth kicker in growing lines of business in gaming and cloud offerings that are fast growing and sport great margins. The plan is to collect modest income on a deep in the money call while I wait on the benefits of having leveraged exposure to upside. I’ve been waiting for the stock to make a sustained move back above its 200 day moving average and that is in place.
I bought MSFT210115C00050000 for 56.85 a share. That is a total cash outlay of $5,685. I turned around and sold the short call MSFT190215C00116000 for 39 cents a share. The long call will be in force for 725 days. The short call has a duration of 25 days and yields an expected 10.02% on an annualized basis against my cost basis of 56.85 a share. I have room for about 10% of price appreciation before I am in danger of being assigned short. That should be plenty but I’ll be prepared to put new capital in the trade to roll up and out if necessary. I expect to do well over a two year period in this stock.
In other news, I have re-entered speculative long positions in AYI and ISRG after waiting for 30 days to pass to avoid a wash sale. I bought 43 shares of AYI for 116.15 and 9 shares of ISRG at 535.00.
Devour your prey raptors!