Earnings Iron Condors: MSFT, TSLA Set for Earnings Week

The upcoming earnings week is significant as major technology companies Microsoft (MSFT) and Tesla (TSLA) are set to report after the market closes on January 28. For traders, this presents an opportunity to utilize iron condors, a strategy that allows participation in the earnings season while mitigating the binary risks associated with earnings announcements. Given Maya's systematic approach, this week’s setups will focus on managing implied volatility rather than speculating on specific directional outcomes.

Historically, MSFT and TSLA have exhibited varied volatility patterns around earnings announcements. For instance, MSFT has recorded mixed outcomes, with a tendency to stay within expected moves only 25% of the time in recent announcements. Conversely, TSLA has shown better adherence to its expected move, remaining within it 50% of the time. Understanding these patterns is key for traders looking to execute profitable iron condors, which rely on the ability of the underlying stock to remain stable.

Understanding the Earnings Iron Condor Strategy

An iron condor consists of selling both a call spread and a put spread, allowing traders to collect premium from both sides of the market. This strategy is particularly effective during earnings season due to the high implied volatility (IV) leading up to announcements, which inflates option premiums. Once the earnings event occurs, the volatility typically collapses, benefiting those who have sold iron condors. This contrasts with gambling on the direction of the stock, as iron condors thrive on stability within a defined range.

Successful execution of an iron condor requires careful risk management. Traders must ensure that the underlying stock remains within the short strikes of the spreads. Therefore, selecting stocks with a history of staying within their expected move is critical. This approach is systematic, focusing on data and historical behavior rather than chance.

Maya’s Earnings Scanner: Your Tool for Identifying Opportunities

Maya's scanner is a powerful resource that automatically identifies optimal earnings iron condor setups. It calculates specific strikes for call and put spreads based on the expected move of the underlying stock. Each setup includes essential metrics such as net credit, maximum loss, and probability of profit, which are crucial for informed decision-making.

For instance, both MSFT and TSLA have been flagged as promising candidates for iron condors this earnings season. The scanner indicates their respective expected moves and historical performance against these moves, which enhances confidence in executing these trades.

MSFT Earnings: Jan 28

Stock Price

$476.25

Max Profit

$1.66

Max Loss

$3.34

📋 Trade Structure:

• Put Spread: Sell $450.0 / Buy $445.0
• Call Spread: Sell $502.5 / Buy $507.5
• Net Credit: $1.66 per contract

⚠️ Critical Trade Management Rules

• One-Day Trade: This is a quick in-and-out trade. Plan to close within one trading day.
• Market Open Execution: Monitor immediately after market open. These positions need tight management from the start.
• 70% Probability Setup: Historically, about 1 in 3 of these trades will become losers. That's expected and part of the strategy.
• Cut Losses Fast: The goal is NOT to let those occasional losers eat up your profits. If the trade moves against you, exit quickly.
• Positive Expectancy: Over a series of trades, small consistent winners and controlled losses create positive account growth.

📊 Chart Guide: The green dashed line is the current stock price. The orange lines are your short strikes ($450.0/$502.5) - your profit zone. The red lines are your long strikes ($445.0/$507.5) - your defined risk protection.

TSLA Earnings: Jan 28

Stock Price

$436.25

Max Profit

$1.66

Max Loss

$3.34

📋 Trade Structure:

• Put Spread: Sell $407.5 / Buy $402.5
• Call Spread: Sell $465.0 / Buy $470.0
• Net Credit: $1.66 per contract

⚠️ Critical Trade Management Rules

• One-Day Trade: This is a quick in-and-out trade. Plan to close within one trading day.
• Market Open Execution: Monitor immediately after market open. These positions need tight management from the start.
• 70% Probability Setup: Historically, about 1 in 3 of these trades will become losers. That's expected and part of the strategy.
• Cut Losses Fast: The goal is NOT to let those occasional losers eat up your profits. If the trade moves against you, exit quickly.
• Positive Expectancy: Over a series of trades, small consistent winners and controlled losses create positive account growth.

📊 Chart Guide: The green dashed line is the current stock price. The orange lines are your short strikes ($407.5/$465.0) - your profit zone. The red lines are your long strikes ($402.5/$470.0) - your defined risk protection.

While Maya's scanner identifies these iron condor opportunities, it's important to note that Maya herself avoids holding directional spreads through earnings due to the inherent risks associated with volatility spikes. Before entering trades, Maya checks for any earnings overlap with expiration and will exit any position with less than seven days to earnings. This precaution is taken to sidestep the unpredictable nature of earnings announcements.

During earnings season, traders may find fewer opportunities aligned with Maya's primary trading strategy of bull call spreads. However, utilizing iron condors identified by Maya's scanner allows traders to remain engaged in the market and systematically manage risk without resorting to gambling on earnings outcomes.