Lawrence G. McMillan
Bullish investors defy the evidence. Apple and Amazon could be a reality check.
Published: July 31, 2025 at 12:10 p.m. ET
Microsoft MSFT reported earnings after the market close on July 30, and on July 31 the stock has exploded to the upside. Leading into the earnings, the option market had priced the near-term straddle at a mere 19.5 points (3.8%), so this earnings beat was a large one. Somewhat ironically, that 3.8% projection was about in the middle of the post-earnings moves in the past 10 quarters. However, the prior three quarters had seen moves of +7.6%, -6.2% and -6.0%, respectively. Adding this current move of 8.8% to that list, one can see that the option market has been underestimating Microsoft’s moves for a year now. There is not a logical explanation for this underpricing by the option market.
Meta Platforms META also reported earnings after Wednesday’s close. Coming into the earnings, the option market had priced the straddle at 42 points, or 6% of the stock price. That straddle price was cheaper than six of the past 10 post-earnings moves by Meta — meaning that the odds were theoretically slightly in favor of buying the straddle.
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