Tony Zhang's Microsoft Trade

On CNBC's "Options Action," Tony Zhang suggested that traders should consider a bullish options trade in Microsoft Corporation MSFT, ahead of earnings.

He said that the stock has outperformed the market and the technology sector and it is trading less than 10% off its highs. He likes its strong relative strength going into earnings, but he sees a limited upside for the stock.

To make a bullish bet, Zhang wants to sell a put spread in the name because of its high implied volatility. Specifically, he wants to sell the June 5, $172.50/$162.50 put spread for a credit of $4. He is going to collect the premium if the market stays above $172.50 and he is going to start to lose money below $168.50. He can maximally lose $6.