Update: Microsoft (MSFT) Windows Dressing

by CC July 21, 2017 10:32 am • Trade Updates

Last week, we previewed MSFT earnings (announced after the close last night). We detailed two trade ideas, one bullish and the other a bearish/hedge. With the stock slightly higher from entry, and down barely on the report itself wanted to check in on those trades. First, here was the bearish/hedge:

MSFT ($72.95) Buy Sept 72.50 / 65 Put Spread for $1.85

-Buy 1 Sept 72.50 put for 2.25

-Sell 1 Sept 65 put at 40 cents

With the stock 73.85 this trade is worth about 1.20. If done as a hedge, or even bearish outright I think it’s alright to keep this on and see what the next move is in the stock. MSFT, like other big cap tech is at highs and September expiration allows for a lot of time for a rejection here, either in the stock or broader market. It may need to be adjusted if the stock doesn’t quickly reverse but may be worth waiting a week or 2 to see what the stock does next.

As far as the bullish trade, it was intended to take advantage of a small move higher, and then position cheaply for higher highs later. Here it was:

MSFT ($72.95) Buy July 21st/ Sept 75 call calendar for 65 cents

-Sell 1 July 21st 75 call at 65 cents

-Buy 1 Sept 75 call for 1.30

With the stock 73.85 this trade is worth 1.30, a double so it worked out well. For those happy with those gains the trade can simply be closed. For those wanting to stay in the name through the summer the July calls can be closed and rolled to the Sept 80s, creating a very cheap call spread (around .40) to make up to 4.50 if the stock is 80 or higher in September. Of course that books none of the profits.