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It sounds like he bought MSFT stock and then sold a call option on it. Selling call options is a profit and risk reducing betting strategy where you sell rights
by webinvest 5y ago
It sounds like he bought MSFT stock and then sold a call option on it. Selling call options is a profit and risk reducing betting strategy where you sell rights (but not an obligation) to the buyer to call away shares at a fixed “strike” price between now and an agreed-upon expiration date in exchange for a modest fixed premium. The stock price went over the strike price before the expiration date and were called away from him. Looking at Microsoft’s price chart, over the last 5 YEARS, you would have never lost money over any 4 month period (fiscal quarter) by just simply holding MSFT shares —- and that’s before adding in the increasing quarterly dividends!
Here’s an reasonable analogy for article writers that understand baseball more than options and stocks:
1) Selling call options like this Rep did is like bunting the baseball. This is where you hold the bat sideways and let the baseball tap on the bat. No chance of missing the ball but you can only get 1 base.
2) Buying and holding stock is like hitting the baseball your normal way. It’s the most common strategy. Maybe you’ll hit a home run, maybe you’ll get a few bases, maybe you’ll strike out.
3) Buying call options is like swinging for a homerun each time. You often run the risk of someone catching the ball or you miss hitting the ball but when it works, you hit it big.
In terms of baseball, swinging normally/commonly is the best strategy… do you agree? Next is aiming only for home runs. Last is bunting the ball or copying what this rep does.