The Motley Fool Discussion Boards

Previous Page

Stocks M / Microsoft Corp.


Subject:  Re: New to the MSFT Syn Covered Call Date:  9/27/2012  2:29 PM
Author:  0gre Number:  155916 of 157291

So here's what I see. You are getting virtual shares of Microsoft for $29.53 and so long as its below $31 in January, you pocket a $.97 premium.

I wouldn't touch this with a 10' pole because essentially you are assuming all the risk associated with the stock but you don't get the dividend which has been the biggest reward for shareholders over the past 10 years. You profit on this position so long as the stock finishes above $28.56, but your upside is capped.

My feeling here is that Microsoft is at a pivotal point. If Windows 8 fails to gain traction, it's going to be a long road to recovery and I think everyone knows it and it's likely shareholders (and synthetic shareholders) will be punished. If Microsoft does well, shareholders will be rewarded, but you're left with a modest gain.

If you think Windows 8 is going to be a hit, I sugget you just do a straight synthetic long and skip the covered call. You seem to be betting on status quo which I feel is unlikely at this point.
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us