After the huge flush we had in the indices in the past week, I saw flow in GV on 4/22/2024. IGV is iShares Expanded Tech-Software Sector ETF. The biggest holdings are MSFT, ORCL, CRM, PANW.

This week we have MSFT earnings. And this would be just the start of the big tech earnings.

Initially the flow was 3.36M premium worth Jun monthly expiration 84C. This was more than 23K contracts. Like always there are trades that followed. And the volume for the 84 strike got to 25K contracts.

Then I saw the 1.2M sell volume on the platform I use called Bullflow.io and before end of day another $1M sell showed up again.

And the volume for the 84C strike was more than 41K. So, I decided to wait to see how much of the volume translates into open interest.

And today I saw only 8.9K contracts show up in OI. Even though most of the contracts were closed yesterday. Today Jun 85C are seeing volume.

IGV is a nice way to play the software earnings.

Now that I waited for confirmation as to how much of the volume from yesterday actually stays as OI, I can decide what kind of trade I can take. But we are rallying today in the market so I am thinking of doing a call calendar on IGV.

I am thinking of selling 85C for May 17th and buying Jun 85C for a total debit of $0.85 per contract.

If earnings are bad for the major software companies and IGV falls then the max I can lose is $0.85 per contract.

If some of the companies rally after earnings but some don’t but the overall direction is a slow climb up then I will make money. And if we rally because MSFT and others rally then this trade can easily make 50% profit.

The risk profile of this trade is shown above. If we get below 77-78 level in IGV then this trade will be losing some value. But if IGV goes up all the way to 88 then also this trade makes money.

Why calendar and why not just buy 84C like what the flow from yesterday or 85C (flow from today)?

The 84C for Jun currently can be bought for $1.75 per contract and 85C can be bought for $1.4 per contract.

So, I am spending double the amount as an earnings trade. And as we know earnings are ultimately a lotto trade.

The most important part of doing a calendar is that I can lose at the most $0.85

LESS DEBIT PAID IS ULTIMATELY LESS RISK.

This is my plan and a way to play MSFT earnings.

Disclaimer: This is my trading plan on the indices. This is intended to be for educational and informational purposes only. Trading is risky and loss of capital is possible. Do your due diligence. In trading, there are no guarantees. So please be careful risking capital.

I write a substack with these type of trade plans and analysis. Check it out. 

http://indexincome.substack.com