MSFT @ $369.40 UNDERWATER $18.60 (4.8% below SS)
5 contracts (500 sh) | SS: $388.00 | IV: MEDIUM
LC: $280 exp 2028-01-21 (entry $152.408/sh)
SP: $390 exp 2028-01-21 (entry $53.016/sh)
HP: $330 exp 2026-06-18 (entry $7.977/sh)
Economics
| Max Loss | $83,684 | (ND $107.37 + SW $60) x 500 |
| Normal income ref | $5,230/mo | 75% ann ROI on ML |
| Hedge rolling cost | $1,580/mo | |
| FIGHT CC | $372 call, $4.60 bid | exp 2 Apr 2026 (7d DTE) |
| Conservative CC | $388 call, $0.71 bid | exp 6 Apr 2026 (11d DTE) |
FIGHT Allocation
| Contracts | Income/mo | Net/mo | CC→SS Gap | Net@SS |
|---|
| Cover hedge | 1/5 | $2,746 | $1,166 | $1,090 | $8,722 |
| Match normal | 4/5 | $8,079 | $6,499 | $4,360 | $5,452 |
| Full FIGHT | 5/5 | $9,857 | $8,277 | $5,450 | $4,362 |
FIGHT Options (exp 2 Apr 2026, 7d DTE)
Fortress delta: 1.055 (IBKR) | Gain@SS: $9,812
| OTM% | Strike | Bid | $/ct/mo | Survival | Hedge Ct | Match Ct | Gap/ct | Gap@Match | Net@Match | Net@Strike | Net@SS |
|---|
| 1% | $372 | $4.60 | $1,971 | 57% | 1/5 | 4/5 | $1,090 | $4,360 | $6,499 | $3,475 | $5,452 |
| 2% | $378 | $2.71 | $1,161 | 67% | 1/5 | 5/5 | $779 | $3,895 | $4,227 | $5,628 | $5,917 |
| 3% | $380 | $2.02 | $866 | 72% | 1/5 | 5/5 | $598 | $2,990 | $2,748 | $6,602 | $6,822 |
| 5% | $388 | $0.77 | $330 | 84% | 5/5 | 5/5 | $0 | $0 | $70 | $9,933 | $9,812 |
* = cannot fully match normal income with 5 contracts
TRADE RECOMMENDATION (match normal income)
Sell 4: MSFT $372 call (exp 2 Apr 2026, 7d DTE, ~$4.60 bid)
Keep 1: $388 CC (~$0.71 bid)
Net income: $6,499/mo (target $5,230)
Gap CC→SS: $1,090/ct ($4,360 across 4 contracts)
Legend
| Max Loss (ML) | Worst-case loss: (Net Debit + Spread Width) x shares. ND = LC entry - SP entry + HP entry. SW = SP strike - HP strike. |
| Normal income ref | Target monthly income: IV-based annual ROI on ML / 12 (LOW 45%, MED 75%, HIGH 95%) |
| Hedge rolling cost | Monthly cost to maintain the HP (protective put): (30 / HP_DTE) x HP_ask x shares |
| FIGHT CC | Short-dated, near-ATM covered call for income recovery |
| Conservative CC | Standard CC at safe strike (far OTM when underwater) |
| Cover hedge | Min FIGHT contracts to pay for the hedge rolling cost |
| Match normal | FIGHT contracts needed to reach normal income target |
| Gap/ct | Net gap risk per contract: (SS - strike - bid) x 100. Max loss if stock rallies to SS, net of premium received. |
| Gap@Hedge | Total gap risk at cover-hedge contract count |
| Gap@Match | Total gap risk at match-normal contract count |
| Net@Match | Monthly income after hedge cost at match-normal level |