[Weekly Performance Fluctuation Report] A Tale of Two Extremes in Option Pricing: Is Microsoft 'Expensive' While Tesla Seems 'Cheap'?

This week marks a critical juncture for the US earnings season, with tech giants collectively 'handing in their results'! For options traders, this is a great opportunity to capture volatility, but before making any moves, it’s essential to identify which options are 'expensive' and which are 'cheap,' as this will significantly impact your profit potential.

📈When IV is at a historical high, option prices tend to be relatively expensive; be cautious of volatility pullback.

📉When IV is at a historical low, option prices are relatively cheap, making it suitable to leverage potential gains or capture volatility.

1. Key Focus This Week

After the market closes on Tuesday (January 28), Tesla and Microsoft will release their earnings side by side, with their options markets showing contrasting risk sentiment.

📈TSLA (Tesla): Opportunities under low IV

Data: As of January 26, $Tesla (TSLA.US)$ IV stands at 50.02%, with the IV percentile at only 7%.

This means Tesla's current IV level is at a historical low, and the market expects future stock price volatility to potentially ease, or that options prices are relatively cheap.

If a significant price movement is expected but the direction cannot be determined, consider adopting a long volatility strategy.Due to the low IV, the cost of buying options is relatively low. If significant volatility occurs in the future (whether up or down), both the increase in IV and price displacement could bring profits.

However, if the stock price continues to consolidate, time decay may lead to losses.

If optimistic about Tesla’s outlook and expecting moderate upside,a bull call spread strategy can be used to reduce costs and risks.

📈MSFT (Microsoft): Premium risk under high IV

Data: As of January 26th, $Microsoft (MSFT.US)$ IV is at 32.87%, with the IV percentile as high as 91%.

Option premiums are at their highest levels for the year; the market has fully priced in future volatility risks, making option prices relatively expensive.

High IV implies an extremely high cost of buying options. After earnings are announced, regardless of whether the stock price rises or falls, IV will most likely sharply contract (IV Crush). Directly purchasing single-legged options could easily result in the risk of 'correct direction, but account loss.'

Stockholders can utilize high IV by selling call options to collect premiums and increase their margin of safety.For example: Covered Call strategy

Caution: Naked selling of options carries unlimited risk and is only suitable for professional investors with strict risk management capabilities.

Note: The IV percentile measures the current IV relative to levels over the past year. A higher value indicates more expensive options; a lower value indicates cheaper options.

2. Market Scan: Opportunities and Pitfalls

Following this logic, we categorize this week’s popular stocks as follows:

🔥 High IV Stocks (IV Percentile ≥ 70%):
Apart from Microsoft, there is also $ASML Holding (ASML.US)$ (87%)、 $Meta Platforms (META.US)$ (79%)、 $Exxon Mobil (XOM.US)$ (70%)。 Market expectations may be overheated, with options at a premium. Selling strategies are worth considering, leveraging the market’s high expectations to collect expensive premiums (Time Decay & IV Drop), offering theoretically higher probability of profit.

💧 Low IV Stocks (IV Percentile ≤ 20%):
This week mainly features $Tesla (TSLA.US)$ (7%)。 Market expectations remain stable, making option prices more reasonable. If an unexpected earnings fluctuation is anticipated, buying options now offers strong leverage, allowing for potentially high returns with minimal capital investment.

Screening criteria: Stocks releasing earnings before February 1, 2026, with a US market cap greater than $500 billion; as of January 26, IV percentile >70% or <20%.

3. Tool Application: Customized Strategy Building

For complex situations like MSFT, characterized by 'high IV and expensive options,' if holding the underlying stock long-term with confidence in its development but short-term concerns about earnings volatility, consider a Covered Call strategy to enhance returns.

We all understand the theory, but when faced with situations like Microsoft being 'too expensive,' how do you calculate complex combination strategies?

Don't overthink it, just use the tool to help you 👇👇

Open the Futu App and select[Market] > [Options] > [Options Strategy], generate customized strategies in 3 steps:

1. Choose your outlook:Do you think Microsoft will have a 'mild uptrend' or 'range-bound consolidation'?

2. Input expectations:What range do you expect the stock price to fluctuate within?

3. Fill in your budget:Enter the amount of capital you want to invest

In just 3 steps, you can automatically get matched with option strategies currently worth considering based on your expectations.

Whose earnings performance are you optimistic about? Will you place bets in advance?Feel free to leave comments and share in the comment section!

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Disclaimer

This content does not constitute any offer, solicitation, recommendation, opinion, or guarantee regarding any securities, financial products, or tools. The risk of loss in trading options can be significant. In some cases, the losses you incur may exceed the initial margin deposit. Even if you set contingency orders such as “stop-loss” or “limit” orders, these may not necessarily prevent losses. Market conditions may render these orders unexecutable. You may be required to deposit additional margin within a short period. If you fail to provide the required amount within the specified time, your open positions may be liquidated. However, you will still be responsible for any deficits in your account. Therefore, before trading, you should research and understand options and carefully consider whether such trading suits your financial situation and investment objectives. If you trade options, you should familiarize yourself with the procedures related to exercising options and the expiration of options, as well as your rights and obligations when exercising options and upon their expiration.

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