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An iron condor options structure is in focus for Microsoft (MSFT) after the stock posted back-to-back monthly gains that leave the tape extended. MSFT climbed 25% in July and then added 9% in August.
The shares could be due for a period of consolidation, and the iron condor is the instrument that benefits if that thesis plays out over the weeks ahead. The structure profits on two conditions running together.
MSFT needs to stay range-bound, and implied volatility needs to contract.
After back-to-back large monthly moves, implied vol tends to carry a rich bid, and sellers of that premium are positioned for the vol to unwind once the directional momentum fades.
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