MSFT Analysis

Microsoft Corp. (MSFT)

Update 4/28/2017: MSFT rose beyond the profit zone after earning were published but quickly dropped back, allowing me to exit at 52.8% of maximum potential profit.

Shares showed a net rise of 0.7% over one day, or a +264% annual rate. The options position produced a 111.7% yield on debit for a +40,758% annual rate


MSFT publishes earnings on Thursday after the closing bell.

I shall use the series of weekly options that trade for the last time eight days hence, on May 5.

Implied volatility stands at 23%, which is 2.1 times the VIX, a measure of the volatility of the S&P 500 index.

MSFT’s IV stands in the 65th percentile of its annual range and the 88th percentile of its most recent broad movement.

The price used for analysis was $67.78.

Premium: $2.54 Expire OTM  
MSFT-iron fly Strike Odds Delta
Long 72.50 92.2% 9
Break-even 70.54
Short 68.00 52.8% 49
Short 68.00 47.2% 51
Break-even 65.54
Long 63.00 90.0% 9

The premium is 54% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered a position on MSFT as described above. The stock at the time of entry was priced at $67.86.

By Tim Bovee, Portland, Oregon, April 27, 2017

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