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!

Monday Option Trades ON and MSFT

Never miss another opportunity to devour prey!

2 thoughts on “Monday Option Trades ON and MSFT

  • January 23, 2019 at 4:25 pm

    Interesting play on MSFT. I agree with waiting until the correction recovery to sell calls on anything. I had been looking to buy long duration calls on CRM or HUBS with my spare cash, but thought the IV was just too high a couple weeks ago.

    I was wondering what kind of opportunities were opening up from today’s big move in IBM.

    • January 23, 2019 at 5:45 pm

      You can reduce your expense on time value by going deep in the money on calls. You still get leverage but of course your percentage return is lower.

      I’m not following IBM. It has lost its luster to my thinking.


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