A straddle buys a call and a put at the same strike and expiry. A strangle buys them at two strikes, the put below the price and the call above. Both pay when the stock moves a lot in either direction and lose when it barely moves. Selling them is the opposite bet: you're paid up front for the stock staying put, and the loss has no limit.
On 23 October 2026 Microsoft closed at $524.51, with earnings due on 28 October. Buying the 30 October $525 straddle cost $2,830, and it makes money only if Microsoft ends that Friday below $496.70 or above $553.30, about 5.4% either way. The 500/550 strangle cost $1,000 and needs Microsoft below $490 or above $560.
($14.00 + $14.30) × 100 = $2,830
$525 − $28.30 = $496.70
$525 + $28.30 = $553.30
Same idea, two choices: one strike or two, and buying the move or selling the calm. All four use Microsoft's 30 October options at the 23 October bid and ask.
Buy a call and a put at the strike nearest the price. It costs more than the strangle and starts making money after a smaller move.
Buy a put below the price and a call above it. It's cheaper because both options start out of the money, so the stock has to travel further before it pays.
Sell the call and put at one strike. You collect the most premium of the four, keep all of it only if the stock ends on the strike, and lose more with every dollar it travels.
Sell a put below the price and a call above it. Less premium, a wider range where you keep all of it, and the same open-ended loss once the stock breaks out.
Selling a strangle with a cheaper put and call bought further out caps the loss: that's an iron condor, and the same thing around a short straddle is an iron butterfly. Both are compared below.
The prices are real, from the 23 October close. Pick the straddle or the strangle, buy or sell it, and drag where Microsoft might close on 30 October. Or switch to Thursday, the day after the report, to see what's left of the trade once the earnings premium is gone.
The delta near zero means the straddle doesn't care which way Microsoft goes, only how far. Bought at the midpoints it would have cost $2,767.50.
About a third of the straddle's price. Between $500 and $550 both options expire worthless, so the whole $1,000 is lost across that range. Bought at the midpoints it would have cost $967.50.
You keep all $2,705 only if Microsoft ends at exactly $525, and less for every dollar it moves away. Sold at the midpoints it would have paid $2,767.50.
You keep all $935 anywhere between $500 and $550 on 30 October. Sold at the midpoints it would have paid $967.50.
The Thursday line assumes implied volatility drops from about 48% to 27% once the report is out, the level Microsoft's longer options imply without an earnings day in them (more on that below). With Microsoft unchanged on Thursday, the straddle bought for $2,830 would be worth about $595. Nearly all of what you pay for an earnings straddle is the earnings move; if it doesn't come, the money is gone within a day.
Microsoft's price change from the Friday close before each report to the Friday close after it, the same window as the 30 October straddle, for every report from October 2020 to July 2026. The shaded band is where today's trade loses for the buyer.
Hover or tap a bar. Price change only, without dividends. Our calculations from Microsoft's closing prices and the release times in its SEC filings; every report in the period came after the US close. The dollar figures apply the 23 October prices to each past move, since each quarter's options were priced differently.
The market priced a move of about 5.4%. Microsoft's average earnings week moved 4.8% and the median 3.4%, so most weeks the straddle buyer lost and the seller won. The seller's 16 winning weeks made about $22,900 between them, and the 8 losing weeks gave back about $18,100, $8,654 of it in July 2026 alone. Buyers lose most weeks and live on the rare big one; sellers win most weeks, and one big move can take back a year and a half of premium.
Microsoft's 30 October options at five pairs of strikes, priced at the 23 October bid and ask. The last column counts the past 24 earnings weeks that moved past each breakeven.
| Put / call | Buy for | Moved pastof 24 reports |
|---|---|---|
| $525 / $525straddle, the example−5.3% / +5.5% | $2,830 | 8 |
| $520 / $530$5 each side−5.4% / +5.5% | $2,360 | 8 |
| $510 / $540about 3% each side−5.7% / +5.9% | $1,565 | 8 |
| $500 / $550about 5% each side−6.6% / +6.8% | $1,000 | 6 |
| $490 / $560about 7% each side−7.8% / +8.0% | $626 | 2 |
Moving the strikes apart makes the trade cheaper, not easier. The 510/540 strangle costs 45% less than the straddle and needs only a slightly bigger move, because the market priced the earnings jump into every strike. What changes is the payout: past the breakevens, the straddle and the strangle gain the same dollar for dollar, so the cheaper one returns more on the money paid when the big week comes, and loses everything more often when it doesn't. Sellers face the mirror image: the 490/560 strangle collected $563 and was beaten twice in 24 weeks, but one of those was the 21.8% jump.
Options priced across an earnings date carry the expected jump. Once the report is out, implied volatility falls back and takes that value with it.
| Expiry | Move needed | Implied volatility |
|---|---|---|
| 30 Oct 2026weekly, the examplecosts $2,830 | ±5.4% | 48% |
| 6 Nov 2026weeklycosts $3,255 | ±6.2% | 38% |
| 13 Nov 2026weeklycosts $3,645 | ±7.0% | 35% |
| 20 Nov 2026monthlycosts $3,930 | ±7.5% | 33% |
| 18 Dec 2026monthlycosts $5,035 | ±9.6% | 30% |
Every one of these expiries holds the same earnings day, and the shorter the option, the bigger the share of its life that one day is. Splitting the prices into an ordinary daily volatility and one jump gives about 27% a year plus a one-day move of about 5.4%, the same move the 30 October straddle priced. Here's what that means for someone who buys the 20 November straddle for $3,930, thinking the extra time makes it safer, and looks at it on Thursday after the report:
| Microsoft on Thursday | If volatility stayed at 33% | After the crush to 27% |
|---|---|---|
| Down 10%$472.06 | +$1,697 | +$1,485 |
| Down 5.4%$496.19 | +$132 | −$323 |
| Unchanged$524.51 | −$527 | −$1,151 |
| Up 5.4%$552.83 | +$257 | −$241 |
| Up 10%$576.96 | +$1,822 | +$1,536 |
After the crush, the 20 November straddle needs Microsoft up about 6.1% or down about 6.4% just to break even the next day, more than the 5.4% the market expected. The longer expiry doesn't escape the earnings premium; it pays it too, and then pays for three more weeks of time on top. If you buy a straddle for an event, the event has to beat the move already in the price.
Four ways to sell Microsoft's earnings week, all on the 30 October expiry at the 23 October bid and ask. The first two have no limit on the loss; the last two buy options further out to set one.
| Strategy | The trade | Paid to you | Margin held | Most you can lose | Makes money if Microsoft ends |
|---|---|---|---|---|---|
| Short straddle | Sell the $525 call and $525 put | +$2,705 | $13,195 | No limit above; $49,795 if Microsoft went to zero | Between $497.95 and $552.05 |
| Short strangle | Sell the $500 put and $550 call | +$935 | $8,974 | No limit above; $49,065 if Microsoft went to zero | Between $490.65 and $559.35 |
| Iron butterfly | Sell the $525 straddle, buy the $500 put and $550 call | +$1,705 | $2,500 | $795 | Between $507.95 and $542.05 |
| Iron condor | Sell the $510 put and $540 call, buy the $490 put and $560 call | +$879 | $2,000 | $1,121 | Between $501.21 and $548.79 |
The margin figures are the US Reg T minimum. Each naked option needs its premium plus 20% of the share price, less any amount it's out of the money, and never less than its premium plus 10% of the share price for a call or of the strike for a put. A short straddle or strangle holds the larger side plus the other side's premium. For the defined-risk trades it's the width of the wider side, and your broker's own rules are often stricter. Selling naked options also needs the top options approval level at most brokers. In July 2026 the short straddle above would have lost $8,654 on a $2,705 credit; the iron butterfly's worst case was $795.
Each card uses the Microsoft trades above.
Microsoft reports after Wednesday's close, so the move shows up in Thursday's opening price. What's left after that is a little time value that disappears by Friday, so most earnings straddles are sold or bought back on Thursday rather than held.
After a big move one option holds almost all the value and the other is worth a few cents. You can sell the winner and leave the loser to expire, though that leaves the cheap leg's small time value on the table.
Options a cent or more in the money are exercised automatically at expiry. Hold a long straddle to the end and the leg in the money becomes 100 Microsoft shares bought or sold at $525; on a short one, the assigned leg means shares you must take or deliver.
Early assignment on a short straddle is rare while the options still have time value. The usual exception is a short call that's deep in the money the day before an ex-dividend date; Microsoft's next one falls in November, after this expiry. Closing both legs before the last day avoids the automatic exercise at expiry.
Under IRS Publication 550, a call and a put on the same stock held together are offsetting positions, so the tax straddle rules apply on top of the normal option rules.
Options bought and sold or left to expire within a year give short-term gains or losses. A short straddle that expires worthless is a short-term gain of the premium in the year it expires. If a leg is exercised or assigned, its premium goes into the cost or sale price of the shares instead.
If you close the losing leg and keep the winner open, the loss is deferred to the extent the open leg shows an unrealized gain at the end of the tax year. Straddles on broad index options such as SPX are Section 1256 contracts: 60% long-term, 40% short-term, marked to market at year end on Form 6781.
Other countries have their own rules; our options tax tracker keeps the realized and open legs apart for the report.
Everyone knows earnings move a stock. The question is whether it moves more than the 5.4% already in the price. Compare it with the stock's own past reports before you pay.
The 20 November straddle carries the same earnings premium as the weekly, plus three weeks of time. With Microsoft unchanged it would lose about $1,151 the next day.
The short straddle won 16 of 24 earnings weeks and still lost $8,654 in one. An iron butterfly or condor gives up some premium to cap that.
You pay the ask on both options going in and take the bid on both coming out. On the straddle that's $125 of the $2,830 before the stock moves at all.
A long straddle near a strike at expiry can turn into 100 shares, and a short one into an assignment you have to fund. Close both legs before the bell.
A call and a put bought for one move belong together. AllInvestView prices the straddle before you place it and shows it as one position after, synced from every broker you use.
A call and a put on the same stock and expiry are grouped as one straddle or strangle, with the cost, both breakevens and the payoff at expiry, and a flag when earnings fall before the expiry.
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It's a call and a put on the same stock with the same strike and expiry. Buying both pays when the stock moves far in either direction; selling both pays when it stays near the strike. On 23 October 2026, buying Microsoft's 30 October $525 straddle cost $2,830.
A straddle uses one strike for the call and the put. A strangle uses two: the put below the price and the call above it. The strangle is cheaper and needs a bigger move. Microsoft's 500/550 strangle cost $1,000 against $2,830 for the $525 straddle, and needed a move of about 6.7% instead of 5.4%.
When the stock ends past either breakeven: the strike minus what you paid, or the strike plus it. The Microsoft $525 straddle bought for $28.30 a share makes money below $496.70 or above $553.30 on 30 October. In between it loses, most of all at $525.
It's the fall in implied volatility once an expected event such as earnings has happened. Options priced across the report carry the expected jump, and after it that value goes. With Microsoft unchanged the day after its report, the 30 October straddle bought for $2,830 would be worth about $595.
Neither wins by default. The straddle costs more and starts paying after a smaller move; the strangle costs less and needs a bigger one. Over Microsoft's last 24 earnings weeks, the $525 straddle at today's prices paid 8 times and the 500/550 strangle 6 times. Both lost on average, because the market usually prices the move fully.
The loss has no limit on the upside and runs to almost the strike's full value if the stock collapses. Selling Microsoft's $525 straddle paid $2,705 and would have kept money in 16 of the last 24 earnings weeks, but lost $8,654 in July 2026. Brokers ask for the top options approval level, and the Reg T margin was about $13,195.
Options closed or expired within a year give short-term gains or losses. Because a call and a put on the same stock offset each other, the IRS straddle rules apply: a loss on one closed leg is deferred to the extent the other leg shows an unrealized gain at the end of the tax year. Broad index options such as SPX are Section 1256 contracts, taxed 60% long-term and 40% short-term.
Checked on 25 October 2026.
Costs use the ask for options bought and the bid for options sold, before commissions. Implied volatilities, deltas and the Thursday values come from AllInvestView's Black-Scholes engine with a 3.94% rate, each option's volatility solved from its midpoint price, and Microsoft's $0.98 dividend, ex-dividend 19 November, for the 20 November and 18 December expiries. The 27% volatility and 5.4% earnings move come from fitting the five expiries' at-the-money volatilities to an ordinary volatility plus one jump. Earnings-week moves run from the last close of the week before each report to the Friday close after it.