Investors in Microsoft Corporation (MSFT) saw new options trading begin today for the August 5th expiration. Of particular interest are a put contract with a $395.00 strike price and a call contract at $405.00. The put contract currently bids at $13.75, allowing investors to effectively purchase shares at a cost basis of $381.25, representing a potential discount of approximately 1% from the current trading price of $399.93. The odds of this put contract expiring worthless are calculated at 57%.
Conversely, the call contract at a $405.00 strike price bids at $14.65. If an investor buys shares at $399.93 and sells this call option, they could see a total return of 4.93% by the expiration date, excluding dividends. However, there’s a 52% chance this contract will expire worthless, enabling the investor to keep both their shares and the premium collected. The implied volatility for the put is 55% and for the call, it is 56%.
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