A position was established in Morgan Stanley on March 2, 2009. The rational behind this position is that Morgan Stanley is one of the better positioned "bank" stocks to whether the rest of the credit crisis. It is also one of the few investment banks which has made it through the recession without being acquired either out of necessity or otherwise. For this particular stock, the decision was made to establish a relatively long covered call position mainly because of the large volatility inherent in financial stocks. The goal here was to provide a large amount of downside coverage while still yielding a worthwhile profit.
3/2/2009 -- Bought 100 MS @ 18.71
3/2/2009 -- Sold 1 MS July $10 Call @ 9.95
The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1,871.00
Downside Coverage: -53.18%
Possible Max Upside: 6.39%-9.51% (The lower estimate is if the call is exercised before payment of any dividends, the higher estimate is if the stock is held through expiration and two dividends are payed)
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