A once in a century day!

Not sure if you realize that today is a very special day, a day occurring in less than once in 100 years: 15-5-15-5. Today is May 15, 2015 on Friday. For traders, today is even more special as it is an option expiration day. So I want to say something to leave a record in my blog. Since this blog is about investing and trading, let me share with you something about option on the option expiration day. I’m active to trade with options and every option expiration day (the 3rd Friday of each month) is usually my pay day. Why so? Because I usually have several options for income in works each month and more often than not I’m simply collecting money on the 3rd Friday every month when my options expire. On this special day, let me talk about what I’m getting from my most loved stock, MSFT.

As I said many times, MSFT is one of my most loved stocks for long-term. I not only enjoy its long-term earning potential via its fast growing dividends and share price gain, I also frequently trade it for incomes. You see, regardless how great a stock is, it will have good days and bad days. Its share prices will fluctuate, which sometimes could be in extremes. No immunity for MSFT! We have a perfect example recently. About 3 weeks ago, MSFT jumped from low $40s to almost $50 in just 2 days. This kind of 10% move for the size of MSFT is very unusual and as I said, it was often the result of short squeeze. When a stock at this kind of extreme overbought status, it is almost inevitable that it will have to come down first before marching higher again. So I placed deep-in-the-money cover calls against my existing shares for income purpose. For sure as you can see below, MSFT declined soon from $49 to $46 within a few days. So my covered calls have gained almost dollar for dollar accordingly. But this kind of downward move was also too fast too much for me. Although I think MSFT has still more room to go down, in the immediate next few days, I was betting it would go up a bit first instead of going down straight. Since I didn’t want to give up what I had already got in paper from the covered calls if MSFT turned around, I made another income trade: selling put options for a strike $47 expiring today May 15. Well, definitely it was a right trade. MSFT closed above $48 today and my put options expired worthless, meaning I pocked in all the premium for the trade.

While trading is not for anyone, it is a very powerful way to make money from the stock market. The key is to know what and how you play with trading. If you use trading blindly as gambling, most likely you will lose money and FAST! But if you do have a sound knowledge and discipline, and armed by good strategy and technical analysis, trading could be rather lucrative and profitable.

Happy Centurial Day!