MSFT Analysis

Microsoft Corp. (MSFT)

Update 2/3/2017: MSFT hit my price target of25% of the maximum potential profit, and I exited.

Shares declined by 1.2% over eight days, for a -56% annual rate. The options position produced a 33.5% yield on debit for a +1,526% annual rate.


MSFT publishes earnings on Thursday after the closing bell.

I shall use the MAR series of options, which trades for the last time 50 days hence, on March 17.

Implied volatility stands at 26%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.

MSFT’s IV stands in the 50th percentile of its annual range and the 87th percentile of its most recent broad movement.

The price used for analysis was $64.02.

Premium: $3.58 MAR iron fly
MSFT   Odds Delta
Long 70.00 90.8% 10
Break-even 66.08
Short 62.50 40.3% 63
Short 62.50 59.3% 37
Break-even 58.92
Long 57.50 86.8% 11

The premium is 57% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

The granularity of the MSFT options grid isn’t quite what I would like. I was forced to use an unbalanced pair wings, $7.50 for the calls and $5 for the puts, in order to get the odds I wanted.

Decision for My Account

I have entered a position on MSFT as described above. The stock at the time of entry was priced at $3.58.

By Tim Bovee, Portland, Oregon, Jan. 26, 2017

6 thoughts on “MSFT Analysis

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