David, There are several things you can do. One is buy a put on the stock to protect you against the downside, but that will cost you the premium. Another is to short against the box, which is still legal this year. You short the shares, so you are totally out of the position, but don't sell the stock. You can also short the preferred stock, but you have to eat some dividends on that. But it is overpriced vs the common and I kind of like the concept. Unfortunately, Brown is a gyp artist on short sales, as are most brokers unless you have pictures of them in compromising positions with farm animals -g-, so they don't pay a short sale rebate. They just steal your interest.
Unfortunately, there is no "across the street" from Microsoft. My favorite technique is a paired trade, where I keep holding the stock with the gain while shorting a similar stock. But no stock is that similar to MSFT.
You sound like you like the stock and want to hold it for the long term but think it is pricey short term. I don't like it long or short term, but that is neither here nor there. If I felt the way you do, I would sell a Leaps call against it. You only get the protection of the premium, but it is fairly hefty. And, if the stock goes down, you end up owning it at a lower price. Of course, you will have to pay taxes on the call premium.
MB |
