EFTA02368723.pdf

From: Steven Sinofsky Sent: Friday, September 12, 2014 9:35 PM To: jeffrey E. Subject: Re: MSFT risk reduction ok thanks. I'm east saturday then west sunday after 3p=. On Fri, S=p 12, 2014 at 2:33 PM, jeffrey E. <[email protected] <mailto:[email protected]» wrote: dumb, 4,=A0 lets talk over the weekend On Fri, Sep 12, 2014 at 4:23 PM, Steven Sinofsky «mailto > wrote: What do you think of this approach? 547,515 shares with a cos= basis of about 27.50 averaged Forwarded message <mailto Date: Fri, Sep 12, 2014 =t 12:12 PM Subject: MSFT risk reduction To: Steven Sinofsky < Cc: "Irwin, Don X" >, "Dunn, Ashl=y P" We investigated quite a few strategies for h=dging your MSFT position given your input/preferences. These strateg=es included (but were not limited to) the following: Long Put A 1 year put option (90% of spot price) cost=about 5.8% out of pocket and a 1 year option 80% of spot still required ar=und 3.15%. This seemed expensive to us so we looked for ways to cheapen the cost. EFTA_R1_01367935 EFTA02368723  Put Spread Collar Selling a 110% call option to help finance a=90% put option results in a more amenable 2.45% out of pocket cost. =f you were to sell a put to help fully offset the cost of purchasing the 90% put, =he put strike would have to be set at 83%. That limits the total dow=side protection to only 7% while fully capping upside after 110%. Ag=in, this tradeoff seemed less than amenable. Laddered Strategy After pricing other "options*=9D, we developed the following strategy that we recommend you consider. An=illustration of this recommendation has been attached above: * Collar 25% of the MSFT position for 1 y=ar by selling a 105% call to finance a 90% put — cost is approxima=ely 1.3% of notional (or $79,598) * Collar 25% of the MSFT position for 1 y=ar by selling a 110% call to finance a 90% put — cost is approxima=ely 2.45% of notional (or $150,012) * Collar 25% of the MSFT position for 1 y=ar by selling a 115% call to finance an 85% put — cost is approxim=tely 2.25% of notional (or 137,767) * Write actively-managed covered calls on=25% of the position leaving upside (and downside) uncapped (and unhedged) =E24* anticipated net premiums assuming no change in stock price of 1.94% or $118,302.=Please see the second attachment for details. Using the above laddered strategy as our rec=mmended baseline approach, we would welcome any thoughts/feedback. W= can then incorporate this feedback to further refine our strategy and recommendations. As always, don't he=itate to call/e-mail with any questions! Best, --goodspeed =C* please note The information co=tained in this communication is 2 EFTA_M_01367936 EFTA02368724 confidential, may be attorney-client pr=vileged, may constitute inside information, and is intended only for JEE Unauthorized use= disclosure or copying of this communication or any part thereof is str=ctly prohibited and may be unlawful. If you have received this commu=ication in error, please notify us immediately by return e-mail or by e=mail to [email protected] <mailto:[email protected]> , and destroy this communication and all copies thereo=, including all attachments. copyright -all rights reserved </=iv> 3 EFTA_R1_01367937 EFTA02368725