Sold 1 Put Option on MS Stock – 4.52% potential income return in 142 days
On March 28, 2024, I sold 1 put option on Morgan Stanley stock (NYSE: MS) with strike price $91 and expiry next Friday on April 05, 2024. For this trade setup, I was rewarded with $0.15 (after commissions).
Also, I bought an additional share with Morgan Stanley for our long-term dividend stock portfolio, currently, we are holding already 20 shares, with an average buy price of 88.24 per share. Morgan Stanley is a dividend-paying stock and at the moment generates about $57.80 yearly dividend for our stock portfolio.
My plan is to acquire 1 Morgan Stanley share every week until we reach 100 shares and will start selling covered calls. Meanwhile, selling puts and dollar cost averaging.
80 shares to go.
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 APR 05'24 91 PUT 0.15
What happens next?
On the expiry date, April 5, 2024, MS is trading above $91 per share - options expire worthlessly and I keep premium - if MS trades under $91 on the expiry date, I risk getting assigned 100 shares and will have to buy them paying $9,100
But as I already have collected a premium of $4.12 per share, since November 15, 2023 my break-even price for this trade is $91-$4.12= $86.88
In case of an assignment, I will turn this trade into a wheel strategy and will start selling covered calls, while collecting dividend.
Anyhow, if troubled with the strike price near the expiry, I will try to roll it forward and down, preferably for credit, before actually taking the stock assignment
In total: 42 trades since November 15, 2023
Options premium: $412
Shares 20 / Average buy price: $87.40
Gain / loss on shares: +$132.77
Total Gain: +$544.94
Target price before selling: $100