• The company that has been selected is Microsoft Corporation.
It is a U.S.-based multinational company that specializes in the
production of consumer electronics, computer software, and
personal computers, among other offerings.
• An option contract refers to an agreement that entitles the
option holder to sell or purchase the underlying asset on a
specific date and at a predetermined price. In the Microsoft
Corporation, the use of options contract is of high strategic
importance. The publicly held company is able to manage the
average maturity relating to its fixed income portfolio for
achieving the intended economic returns that are related to
specific broad-based fixed income indices by using ‘over-the-
counter swap and option contracts’ and ‘exchange-traded
option and future contracts.’ These contracts are not used as
hedging instruments, and hence they are included in the ‘Other
Contracts’ category (Microsoft Annual Report. Inline XBRL
Viewer, 2021,p .74).
• The value of the purchased option contract (termed as other
contracts) of Microsoft Corporation as on June 30, 2022, was $
2773 million, and the value of the sold option contract of the
company during the same period was $ 544 million (Microsoft
Annual Report. Inline XBRL Viewer, 2021,p. 74). In June 30,
2021, the value of the purchased option contract of the
company was $ 2456 million and the value of the sold option
contract was $ 763 million.
• The value of the option contract (other contracts) of Microsoft
has been extracted from its Annual Statements and presented
below:
Source: (Microsoft Annual Report. Inline XBRL Viewer, 2021, p. 74)
• If a retiree from the Microsoft Corporation receives the
company stock as a part of his pension package benefit, it can
be strategically used for the purpose of earning extra money
above the normal dividends. It can serve as an equity
investment for the investor that can increase the possibility of
gaining high returns. It is essential to make use of the available
stocks in diverse ways so that maximum and optimum returns
can be derived from them. The stock performance in the market
must be evaluated so that a better insight can be got on
regarding its trade range. The covered call option can be used to
make additional money over dividends. It refers to a strategy
which involves the purchase or ownership of stock and the
selling of calls on a share-for-share basis. By engaging in such a
financial transaction, the investor will get the opportunity to sell
call options and own an equivalent amount of underlying
security. By using this method, the retiree will be able to sell call
options on the asset that he holds so that he can have a steady
flow of income. Thus he will have an opportunity to not only
gain dividends from the stocks of Microsoft Corporation but
also have additional income sources that can increase his
financial stability after retirement from the company.
References
Microsoft Annual Report
. Inline XBRL Viewer. (2021). Retrieved
December 21, 2022, from
https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F78
9019%2F000156459022026876%2Fmsft-10k_20220630.htm
