January 23, 2020  Terry’s Tips Trade Alert #2 – Earnings Eagle  portfolio

 

MSFT announces earnings after the close next Wednesday, January 29.  The options are pricing in a 4.2% move while the recent actual move has averaged 2.5%.  This gives us a statistical advantage. We will commit about $3000 to this play:

 

BTO 3 MSFT 17Apr20 165 puts (MSFT200417P165)
STO 3 MSFT 31Jan20 165 puts (MSFT200131P165) for a debit of $3.08  (buying a calendar)

BTO 1 MSFT 17Apr20 160 put (MSFT200417P160)
STO 1 MSFT 31Jan20 162.5 put (MSFT200131P162.5) for a debit of $2.13 (buying a diagonal)

BTO 1 MSFT 17Apr20 165 put (MSFT200417P165)
STO 1 MSFT 31Jan20 162.5 put (MSFT200131P162.5) for a debit of $4.03 (buying a diagonal)

BTO 3 MSFT 17Apr20 170 calls (MSFT200417C170)
STO 3 MSFT 31Jan20 170 calls (MSFT200131C170) for a debit of $2.98  (buying a calendar)

BTO 1 MSFT 17Apr20 170 call (MSFT200417C170)
STO 1 MSFT 31Jan20 167.5 call (MSFT200131C167.5) for a debit of $2.07  (buying a calendar)

BTO 1 MSFT 17Apr20 165 call (MSFT200417C165)
STO 1 MSFT 31Jan20 167.5 call (MSFT200131C167.5) for a debit of $4.48  (buying a calendar)

Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

Happy trading.

Terry