Stock / Symbol: [private_monthly]Microsoft / MSFT[/private_monthly]
Price at trade post: $25.27
Option Strategy: calendar call spread
Reasoning: [private_monthly]MSFT[/private_monthly] is a great stock to trade a using a calendar spread because it doesn't move all that much. We're going with a calendar call spread because we think that the stock is close to a bottom and has more upside than downside. If the stock is trading under $26 by June expiration, we'll have taken in a 24% uncalled return and will then sell the July calls against the position.
Max Risk: $474
Max Reward: $277 or 58% by Jun 17th
Profit Range: $24.97 - $27.22
Max Profit at: $26
Uncalled Return: 24.76%
Trade Details:
[private_monthly]
BTO 6 MSFT Oct11 26 Calls
STO -6 MSFT Jun11 26 Calls
for a net debit of $0.79 per contract
Requirements:
Cost/Proceeds $474.00
Option Requirement $0.00
Total Requirements $474.00
Estimated Commission $15.00
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Chart:
[private_monthly]
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Hi Mike .. Does this stock have to stay above 520 to be a winner for us? Thanks
No. As this is a put spread wherein we’re long a 530 put and short a 520 put, the stock needs to be BELOW $526 by June expiration to be profitable. However, if the stock is at $526 in one week, we’ll be up about $100 or 27%.