This Strategy Pays You 8.7% While Lining Up MPWR at Bargain Prices
At about $912.25 a share, Monolithic Power Systems (MPWR) is trading about 17% below its 52W high.
Do you think MPWR stock is a good long-term bet at current levels? What about at a 40% discount at about $560 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.7% annualized yield at 40% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 1/15/2027, with a strike price of $560
- Collect roughly $2,830 in premium per contract (each contract represents 100 shares)
- That’s about 4.7% annualized yield on the $56,000 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.7%
- And you give yourself a chance to buy MPWR stock at deep discounted price of $560
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
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Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| MPWR stays above $560 | You keep the full $2,830 premium – 5.1% extra income over the next 394 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| MPWR closes below $560 | You’ll be obligated to buy 100 shares at $560. But thanks to $2,830 premium, your effective cost basis is just $531.7 per share – a roughly 42% from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell MPWR Stock or check Monolithic Power Systems Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds. Below is what specifically gives us the conviction.
Why Hold MPWR Stock Long-Term
MPWR’s wide moat, evidenced by high switching costs and proprietary technology, coupled with strong secular tailwinds in high-growth markets like AI, automotive, and industrial automation, makes it a compelling long-term compounder. The company’s consistent market share gains and strong financial position suggest durability and resilience. Even with the current lawsuit, the fundamental drivers of its business remain intact, making us comfortable owning the stock for 5+ years if assigned.
Competitive Advantage
We classify MPWR’s economic moat as WIDE, with the primary source being Switching Costs
- Deep engineering integration and long-term partnerships with customers, with many programs being custom-tuned or co-developed, creating high switching costs.
- Proprietary BCD process technology and a strong patent portfolio create a technological barrier to entry and differentiation from competitors.
- Consistently gaining market share in the analog semiconductor market, with its share tripling to 2.5% over nine years, and its share in the power semiconductor market rising from ~2% in 2017 to 4% in 2022.
- Maintains a high gross margin, suggesting customers are willing to pay a premium for its specialized, high-performance integrated solutions.
See Monolithic Power Systems Full Analysis.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 6.8% (Source: Grand View Research)
Secular Trend: Increasing demand for power management solutions in AI, data centers, automotive (especially EVs), and industrial automation.
Key Risks: A pending class-action lawsuit alleges significant performance and quality control issues with its products, potentially damaging its relationship with a major customer, Nvidia.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: The company has a strong balance sheet with minimal debt; as of September 2025, total debt was approximately $15.07 million, indicating a very low risk of bankruptcy.
Not comfortable with options or stock-specific trades? PORTFOLIOS are even better.
Portfolios Are The Smarter Way To Invest
Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.