Summary of Microsoft Earnings Strategy Article

Author: Koen Hoorelbeke, Investment and Options Strategist

Date: July 23, 2026

Overview

Microsoft is set to report its earnings on July 29, 2026, with the options market anticipating an approximate 8% price movement by that date. The article discusses how traders can utilize this information to structure their options trades effectively, focusing on defined-risk strategies rather than outright bets.

Market Context

As of July 21, 2026, Microsoft shares were trading around $397.75, positioned between its 50-day moving average at $401 and its rising 200-week average at $390. The article emphasizes the importance of understanding the options chain, which reflects the market's expectations for the stock's movement before the earnings announcement.

Options Pricing and Implied Volatility

The options chain indicates that the combined straddle price (the sum of the at-the-money call and put premiums) is approximately $33.40, suggesting an expected price range of $364 to $431. The article highlights the phenomenon of "IV crush," where implied volatility decreases sharply after the earnings report, impacting the profitability of options trades.

Trading Strategies

The article outlines three potential trading strategies based on different market views:

1. Bullish View: Long Call Diagonal

This strategy involves buying a longer-dated call while selling a shorter-dated, higher-strike call to finance the position. For example, buying a $400 call expiring on August 21 and selling a $420 call expiring on July 31. This structure allows for potential profit if Microsoft rises but limits risk to the net debit paid.

2. Neutral View: Short Iron Condor

This strategy involves selling a put and a call at strikes that are outside the expected move, while buying further out-of-the-money options for protection. The goal is to profit if Microsoft remains within a defined range, specifically between $365 and $435, while capping potential losses.

3. Bearish View: Bear Call Spread

This strategy entails selling a call option at a strike above the current price and buying a higher strike call for protection. For instance, selling a $430 call and buying a $440 call. This approach profits if Microsoft stays below $430, leveraging the resistance levels indicated by moving averages.

Conclusion

The article concludes that successful earnings trading requires understanding the options market's pricing of expected moves and selecting appropriate strategies that align with one's market view while managing risk. The focus should be on the reaction to the earnings report rather than the earnings result itself.

Key Takeaways

• Options pricing reflects market expectations for stock movement around earnings.
• Implied volatility tends to drop sharply after earnings announcements, impacting option values.
• Defined-risk strategies can help manage potential losses while allowing for profit opportunities based on market views.