With Microsoft’s (MSFT) announcement of Zune, its entry into the digital media player market, we are once again having a showdown similar to the PC/Mac showdown of the 80s and 90s.
Apple’s (AAPL) iPod has an amazing +75% market share in the digital media player market segment and it’s iTunes product has an even more amazing +85% market share in the online digital music download business. Can Microsoft once again best Apple with the new Zune? What does Zune mean anyway? To the French living in Canada, Zune is a euphemism for human genitalia. Creates a whole new perspective when Bill Gates says, “I’m watching it on my Zune”. Anyway, the phrase “I downloaded X-Men to my Zune” just doesn’t sound as cool as “I downloaded X-Men to my iPod”.
So will Apple use IBM/Microsoft’s successful strategy on the PC and make the iPod hardware an open architecture, or will Apple continue it’s previous strategy of keeping it’s hardware a closed architecture? I think I’ll just hold onto my money and get all the cool iPod features on a free cellphone sometime in the future and let Microsoft and Apple duke it out in the near term.
Nevertheless, Apple and Microsoft are good companies and will be around for a while, so maybe some money can be made from all this hoopla. Using PowerOptions SmartSearchXL to search for covered calls on MSFT and AAPL on October 4, 2006 with options expiring on November 17, 2006, reveals the following available stock options positions:
| SmartSearchXL covered call on October 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price 10/4/2006 |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Assgnd. |
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| AAPL | 74.90 (+0.82) | QAAKM | 06 NOV 65.0 (45) | 11.20 | 15.00 | 2.00 | 2.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AAPL | 74.90 (+0.82) | QAAKU | 06 NOV 67.5 (45) | 9.20 | 12.30 | 2.70 | 2.70 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AAPL | 74.90 (+0.82) | QAAKN | 06 NOV 70.0 (45) | 7.50 | 10.00 | 3.90 | 3.90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AAPL | 74.90 (+0.82) | QAAKE | 06 NOV 72.5 (45) | 5.90 | 7.90 | 5.10 | 5.10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MSFT | 27.81 (+0.44) | MSQKY | 06 NOV 27.5 (45) | 0.95 | 3.40 | 2.40 | 2.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis
The stock options premiums for the AAPL call options are higher than the MSFT premiums, mostly as a result of the volatility of Apple’s stock price being relatively high over the last several years and the volatility of Microsoft stock price being relatively low over the last several years. The search results illustrate the reason the covered call investment strategy is considered conservative (see “Aggressive Strategy for the Conservative Investor” for more information). All of the positions have “downside protection”, i.e., the stock can decline in value and the covered call position can still remain profitable. The search results also illustrate the reason the covered call investment strategy is considered aggressive; as of the AAPL positions has a potential return of 5.1% in 45 days in the event the respective stock option is assigned.
Only one position was returned for MSFT, with a return of 2.4% in 45 days if the price of MSFT remains the same on options expiration in November. Four positions were returned for AAPL with varying potential returns and downside protections. For the extremes, AAPL positions are available with a potential return of 2% and 15% downside protection or with a potential return of 5.1% and 7.9% downside protection.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the Apple/Microsoft covered call investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a covered call investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing covered call stock options positions.
[tags]stock options, covered call investment strategy, option income[/tags]