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Pfizer Inc. Message Board

  • chrttwelve chrttwelve Jun 2, 2011 1:19 PM Flag

    My idea of an MSFT investment

    No - it's hardly a 24/26 spread. With the stock at $24.27, it's selling the 17.50-strike naked puts expiring in Jan. 2013 at my brokerage using cash as collateral. The puts are currently quoted at $99 bid, $100 asked.

    The sale of 100 contracts would bring in $9,800 after commissions and would require $27,500 in cash deposited. As long as the stock doesn't close below $19.75, the return for 19.5 months is 35.6% which is 21.7% annualized. What is wrong with that given the nice downside leewsay.

    And even if $19.75 is breached to the downside, it would be an easy rollout for a credit to the 15-strikes the following year. That would still result in something like a 15% annualized return for the now 31.5-month holding period and all that would be needed would be for the stock to remain above $16.75.

    It's hard NOT to make a great return if the investment is done right from the get-go. Done right means reasonable downside leeway plus doing the transaction at my brokerage and using cash for collateral. Forget the piggy-backing, the multi-legged stool and all that rot. The returns here are so nice and so safe you don't need multi-legged stools.

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PFE
30.40-0.18(-0.59%)Sep 19 4:00 PMEDT

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