EFTA02588639

From: jeffrey E. <[email protected]> Sent: Friday, September 12, 2014 9:34 PM To: Steven Sinofsky Subject: Re: MSFT risk reduction dumb, lets talk over the weekend On Fri, Sep 12, 2014 =t 4:23 PM, Steven Sinofsky •c > wrote: What do you think of=this approach? 547,515 shares with a cost basis of about 27.50 averaged =div> Forw=rded message Subject: MSFT risk reductionar>To: Steven Sinofsky Cc: "Irwin, Don X" < "Dunn, Ashley 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. 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 rA while fully capping upside after 110%. Ag=in, this tradeoff seemed less than amenable. EFTA_R1_01769664 EFTA02588639 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 approxima=ely 1.3% of notional (or $79,598) * Collar 25% of the MSFT position for approxima=ely 2.45% of notional (or $150,012) * Collar 25% of the MSFT position for approxim=tely 2.25% of notional (or 137,767) 1 y=ar by selling a 105% call to finance a 90% put — cost is 1 y=ar by selling a 110% call to finance a 90% put — cost is 1 y=ar by selling a 115% call to finance an 85% put — cost is • Write actively-managed covered calls on=25% of the position leaving upside (and downside) uncapped (and unhedged) =E2 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 =C2 please note The information co=tained in this communication is 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 2 EFTA_R1_01769665 EFTA02588640 < / = iv> EFTA_R1_01769666 EFTA02588641