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-UPDATE
BUY the Microsoft (MSFT) January, 2016 $50-$52.50 in-the-money vertical bull call spread at $2.03 or best
?RISK ON?
Opening Trade
12-1-2015
expiration date: January 15, 2016
Portfolio weighting: 10%
Number of Contracts = 48 contracts
You can pay all the way up to $2.20 for this spread and it still makes sense. If you can?t trade options, then buy the stock.
If you can?t buy the options, then buy the stock outright. I think we continue a slow grind up into the end of the year.
If you want broader sector diversification, buy the Technology Select Sector SPDR (XLK). Its three largest holdings are Apple (AAPL), Microsoft (MSFT), and Facebook (FB).
Keep in mind that a basket of stocks will have lower volatility and lower returns. For more information on this ETF, please click here at
https://www.spdrs.com/product/fund.seam?ticker=XLK.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of optionshouse.
If you are uncertain on how to execute an options spread, please watch my training video on ?How to Execute a Bull Call Spread? by clicking here at https://www.madhedgefundtrader.com/ltt-executetradealerts/
There is now doubt that old tech is back with a vengeance.
Look at the trifecta of blockbuster earnings reports from Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL), and you can reach no other conclusion.
The Microsoft turnaround in particular has been amazing.
The technology giant posted earnings of 67 cents per share for the first quarter of its 2016 fiscal year ending September 30, on revenue of $21.66 billion.
Analysts had expected Microsoft to deliver quarterly earnings of 59 cents per share on $21.03 billion in revenue, according to consensus estimates by Thomson Reuters.
That is a beat, and another beat again!
Costs will fall again in the next quarter, as it has just cut 1,000 jobs.
PC?s, and the software to run them were so 1990?s.
After the Dotcom bust in 2000, Microsoft was dead money for years.
Founder Bill Gates retired in 2008. CEO Steve Ballmer finally got the message in 2013, and retired to pay through the nose for the basketball team, the LA Clippers, some $2 billion.
Succeeding operating systems offered little that was new, and they fell woefully behind the technology curve.
Even I gave away my own machines years ago to switch to Apple devices. These virus immune machines are perfect for a small business like mine, as they seamlessly integrate and all talk to each other.
When the company brought out the Windows Phone in 2010, three years after Apple, people in Silicon Valley laughed.
Long given up for dead as a trading and investment vehicle, the shares have been on a tear in 2015.
Microsoft (+17%) is even beating Apple (+7%)! The stock is hitting a new all time high FOR THE FIRST TIME IN 15 YEARS!
Satya Nadella, who took over management of the company in 2014, clearly had other ideas. The challenge for Nadella from day one was to move boldly into new technologies, while preserving its legacy Windows business lines.
So far, so good.
The key to the company?s new found success was its dumping of its old ?Wintel? strategy of yore that focused entirely on the growth of the PC market alone.
The problem was that the PC market stopped growing, as the world moved on to Cloud and mobile.
The company is now rivaling Apple with $100 billion in cash, almost all held tax-free overseas.
EPS growth will reach 10% next year, beating other big competitors.
Windows and servers, the (MSFT)?s core products, still account for 80% of the firm?s business.
But it?s cloud presence is being ramped up at a frenetic pace, where the future for the company lies, nearly doubling YOY. Mobile technologies, where it has lagged until now, are also on fire.
Rave reviews from its latest operating system upgrade, Windows 10, also helped.
On top of all of this, Microsoft is paying a generous 3% dividend. It?s earnings multiple at 15X makes it a bargain compared to other big tech companies and the rest of the market.
As I explained in my recent research piece ?Switching From Growth to Value? (click here at https://www.madhedgefundtrader.com/switching-from-growth-to-value/), Microsoft makes a perfect investment for a mature bull market.
It is not only at a multiple discount to the rest of the market, now at 18X, it is cheap when compared to the rest of its own sector as well.
This is when investors and traders bail from their high priced stocks to safer, lower multiple companies.
Obviously, I don?t want to pile into Microsoft, or any other of the big tech stocks on top of a furious 10% spike. But it is now safely in the ?buy on the dip? camp, alone with the rest of big tech.
The party has only just stated.
To read my interview with Bill Gates? father, please click here for ?An Evening With Bill Gates, Sr.? at https://www.madhedgefundtrader.com/an-evening-with-bill-gates-sr-3/.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don?t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position:
Buy 48 January, 2016 (MSFT) $50 calls at????.?.$5.00
Sell short 48 January, 2016 (MSFT) $52.50 calls at..?.$2.97
Net Cost:??????????????????.?.....$2.03
Potential Profit: $2.50 - $2.03 = $0.47
(48 X 100 X $.47) = $2,256 or 2.26% profit for the notional $100,000 portfolio.
