Trade Alert - (MSFT) February 21, 2012
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert-(MSFT)
Buy the Microsoft (MSFT) March, 2012 $28-$30 Call Spread for a net cost of $1.85 or best
Opening Trade
2-21-2012
expiration date: 3-17-2012
Portfolio weighting: 10% when in the money
($10,000/100/$1.85) = 54 Contracts
To execute this trade you must open two positions simultaneously:
1) Buy The (MSFT) March, 2012 $28 calls at $3.50
2) Sell Short the (MSFT) March, 2012 $30 call at $1.65
The maximum profit occurs with Microsoft stock trades anywhere over $30 on March 17, 2012. Let?s assume that at expiration, (MSFT) is at $30. Then the profit is:
Today:
March $28 call cost??????. $3.50
March $30 call premium earned?-$1.65
Initial net cost????????. $1.85
At Expiration
March $28 call ?..??????. . $2.00
March $30 call ???.?????-$0.00
Net Value at expiration?????.$2.00
Net profit: $2.00 - $1.85 = $0.15
($0.15 X 100 X 54) = $810, or 0.81% for a $100,000 model portfolio
If Microsoft stock does fall, I will end up owning the shares at a net cost of $27.85.
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