Dan Nathan's Microsoft Options Trade

On CNBC's "Options Action," Dan Nathan spoke about an options trade in Microsoft Corporation MSFT, which is due to report earnings on Thursday.

Nathan thinks that it would be a good idea to sell the July 75 call for 65 cents and buy the September 75 call for $1.30. This options structure is called a calendar spread and in this case it costs 65 cents to initiate the position. Nathan wants the stock to trade up to $75 after the earnings, but it's important that it doesn't close above $75 at the July expiration. If the July call expires worthless, Nathan is going to own the September 75 call for 65 cents.