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

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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
Calls
Long	72.50	92.2%	9
Break-even	70.54
Short	68.00	52.8%	49
Puts
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