Discover more from Covered Calls with Reinis Fischer
Sold 1 Put on MS Stock – 0.16% potential income return in 9 days
On November 15th, 2023, I executed the sale of a single put option on Morgan Stanley stock (NYSE: MS), featuring a strike price of $76 and an expiration date set for November 24, 2024. This trading maneuver resulted in a reward of $12.54, net of commissions.
Concurrently, I initiated the acquisition of one share of MS for our dividend stock portfolio, partially funding this purchase through the received options premium.
With the aim of implementing a strategic approach, I am contemplating a weekly routine of purchasing one MS share. This method, known as dollar-cost averaging, allows for a gradual accumulation of shares, and the use of put options serves as a means to support and facilitate these recurring trades.
Morgan Stanley is an American multinational investment bank and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in 41 countries and more than 75,000 employees, the firm's clients include corporations, governments, institutions, and individuals.
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.
Here is the trade setup:
SLD 1 MS Nov24'23 76 PUT 0.14
What happens next?
Upon the expiration date, November 24, 2024, should MS be trading above $76 per share, the options will expire without value, and I retain the premium. However, if MS is below $76 on the expiration date, there's a risk of being assigned 100 shares and incurring a purchase cost of $7,600.
The break-even price for this scenario stands at $75.88 (calculated as $76 - $0.12).
In the event of an assignment, I plan to transition this trade into a wheel strategy, initiating the sale of covered calls on the acquired position.
Nevertheless, if confronted with the strike price nearing expiration, I will explore the option to roll it forward and down, preferably securing a credit. This strategic move is intended to be executed before actualizing the stock assignment, providing flexibility and risk mitigation
In total: 2 trades since November 15, 2023
Options premium: $12
Average buy price: $79.46
Dividend collected: $0