Microsoft (MSFT) PriceWatch Alert Shows Bearish Technicals

Posted on Tuesday, July 01, 2008 8:07 AM

Microsoft (NasdaqNM: MSFT) closed yesterday at $27.51. So far the stock has hit a 52-week low of $26.87 and 52-week high of $37.50. Microsoft stock has been showing support around 27.17 and resistance in the 28.15 range. Technical indicators for the stock are Bearish and S&P gives MSFT a very positive 5 STAR (out of 5) strong buy rating. MSFT appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Oct '08 28 covered call (MSQ JT) for a net debit in the $25.92 area. That is also the break even stock price for this trade. This covered call has a 109 day duration, provides 5.78% downside protection and an 8.02% assigned return rate for a 26.87% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the MSFT Jan '09 22.50 Call (MSQ AX) and selling the Oct '08 28 call (MSQ JT) for a $4.41 debit. The trade has a 109 day life and would provide 2.18% downside protection and a 24.72% assigned return rate for an 83.00% annualized return rate (for comparison purposes only). Microsoft has a current annual dividend yield of 1.60%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]