CML Viz is a tool that I regularly use to generate option trade ideas and MSFT is one of my favorite stocks to trade using this tool.
CML Viz is the best options backtesting tool on the market in my opinion and last year it received a Fintech award from Benzinga.
The beauty of the software is that you can backtest specific strategies and also include parameters like stop loss and trading around earnings.
One such earnings trade that has worked really well in the past in buying calls on MSFT in the lead up to earnings and then selling them 1 day before the announcement.
The setup goes like this:
- Buy 40 delta calls 14 days before earnings
- Close 1 day before earnings
- Only open if the stock is above the 50-day moving average
- 40% profit target
- 40% stop loss
Here are the results over the last 3 years:
Remember that options tend to hold their value in the run up to earnings due to the higher implied volatility surrounding the uncertain outcome.
MSFT also seems to have a habit of rising into earnings as traders expect positive results.
By closing the calls before the announcement, we are not exposed to any earnings risk.
This trade worked to perfection again this time, you can tell just by looking at the chart!
Earlier in the year the founder of CML Viz did a demo for my readers, you can watch the replay below:
If you want to take advantage of the special offer mentioned at the end of the webinar, you can do so here.
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.