Microsoft (MSFT) PriceWatch Alert At $24.86 Break Even

Posted on Thursday, July 17, 2008 8:07 AM

Microsoft (NasdaqNM: MSFT) closed yesterday at $27.26. So far the stock has hit a 52-week low of $24.87 and 52-week high of $37.50. Microsoft stock has been showing support around 25.45 and resistance in the 28.19 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 a Jan '09 27.50 covered call (MSQ AY) for a net debit in the $24.86 area. That is also the break even stock price for this trade. This covered call has an 184 day duration, provides 8.80% downside protection and a 10.62% assigned return rate for a 21.07% 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 25 Call (MSQ AE) and selling the Jan '09 27.50 call (MSQ AY) for a $1.55 debit. The trade has an 184 day life and would provide 2.60% downside protection and a 61.29% assigned return rate for a 122.00% annualized return rate (for comparison purposes only). Microsoft does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]