MSFT Analysis

Microsoft Corp. (MSFT)

Update 11/7/2018: I have exited MSFT for a debit of $828 per contract, $32 less than the $860 entry credit, with shares trading at $110.64, up $r.91 from entry.

Shares rose by 4.6% over 14 days, or a +121% annual rate. The options position produced a 3.8% return for a +101% annual rate.

I have entered a short iron fly spread on MSFT, using options that trade for the last time 58 days hence, on Dec. 21. The premium is a $8.60 credit and the stock at the time of entry was priced at $105.73.

I entered the trade to coincide with an earnings announcement, today, Oct. 24, after the closing bell.

The profit zone for this position is between !$ on the upside and !$ on the downside.

Implied volatility stands at 38%, which is !0 times the VIX, a measure of the volatility of the S&P 500 index.

MSFT’s IV stands higher than all of its daily readings over the past year.

The price used for analysis was $105.32.

Premium: $8.60 Expire OTM
MSFT-iron fly Strike Odds Delta
Long 120.00 88.7% 13
Break-even 113.60 69.5% 34
Short 105.00 50.3% 54
Short 105.00 49.4% 46
Break-even 98.60 67.0% 29
Long 90.00 84.6% 12

The premium is 57.3% of the width of the position’s wings.

The risk/reward ratio is 0.7:1, with maximum potential loss of $640 per contract and maximum potential gain of $860 per contract.

The bid/ask spread was 1.7%.

By Tim Bovee, Portland, Oregon, Oct. 24, 2018


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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