MSFT Analysis

Microsoft Corp. (MSFT)

Update 6/12/2017: MSFT, along with other tech stocks, began to decline at entry on June 7, and I exited for a loss on the fourth day of decline as expiration approached.

Shares fell by 4.1% over five days, or a -299% annual rate. The options position produced a -40.9% loss on debit for a -2,986% annual rate.

MSFT has sufficiently high implied volatility and liquidity to qualify as a trade.

I shall use options that trade for the last time nine days hence, on June 16.

Implied volatility stands at 20%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.

MSFT’s IV stands in the 54th percentile of its annual range and the 72nd percentile of its most recent broad movement.

The price used for analysis was $72.22.

Premium: $1.30 Expire OTM  
MSFT-iron fly Strike Odds Delta
Long 75.00 93.5% 7
Break-even 73.30
Short 72.00 46.5% 55
Short 72.00 53.8% 45
Break-even 70.30
Long 69.00 92.2% 7

The premium is 43% of the width of the position’s wings.

The risk/reward ratio is 1.3:1.

Decision for My Account

I have entered an order on MSFT as described above. The stock at the time of entry was priced at $72.28.

By Tim Bovee, Portland, Oregon, June 7, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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