Shake up Your MSFT Trades: Leveraged & Inverse ETF Strategies for Earnings Season

This is sponsored content.  Barchart is not endorsing the websites or products set forth below.

Microsoft Corporation's (MSFT) Q2 2025 earnings report, scheduled for January 29th, 2025, will be closely scrutinized by investors. Key areas of focus include the growth of Azure, the performance of the Productivity and Business Processes segment, and the company's progress in artificial intelligence (AI). Investors will also be watching for updates on gaming revenue, guidance for the rest of the fiscal year, and the competitive landscape.

In addition to these key areas, investors will be looking for management's commentary on the overall economic outlook, any updates on potential acquisitions or strategic partnerships, and the company's long-term growth prospects.

As one of the world's largest companies, MSFT often experiences heightened volatility around earnings releases. For traders looking to capitalize on this increased volatility, whether bullish or bearish, Direxion's Single Stock Daily Leveraged & Inverse ETFs are popular tools to potentially profit from anticipated price swings.

What to Expect from Microsoft's Next Earnings Report

Analysts expect Microsoft to deliver earnings of $3.13 per share, representing a 6.8% increase from last year's $2.93. The company enters this report with momentum, having topped Wall Street's expectations in each of the past four quarters. Cloud growth remains in focus, with Azure's revenue guidance of 31-32% constant currency growth being a key metric traders will watch.

The previous quarter saw Microsoft exceed estimates with $3.30 earnings per share on revenues of $65.6 billion. However, forward guidance led to volatility, particularly around cloud growth projections and anticipated OpenAI-related expenses.

Microsoft’s Current Quarter Setup

Wall Street analysts are forecasting earnings of $3.13 per share, with estimates ranging from $3.02 to $3.25. This represents a potential 6.83% year-over-year growth. MSFT heads into earnings trading near $445, with volatility metrics suggesting bigger moves ahead of the announcement.

Microsoft's Earnings Track Record

The tech giant has consistently topped analyst expectations, with earnings surprises ranging from 1.72% to 7.14% over the past four quarters. October 2024's significant beat ($3.30 vs $3.08) triggered a 6.1% decline, proving that beating estimates doesn't guarantee upside. July's 4.63% beat drove shares up 2.8%, while recent quarters have averaged a 4% move in either direction post-earnings.

2 ETFs for Speculating on Microsoft's Short-Term Direction

Whether you’re bullish or bearish on MSFT, Direxion's Single Stock Daily Leveraged & Inverse ETFs, launched in September 2022, are great short-term trading tools for traders to attempt to capitalize on increased movement for the stock.

Unlike traditional ETFs, Direxion’s ETFs use derivatives and swaps to deliver leveraged and inverse daily returns, making them especially potent around high-volatility events like earnings announcements.

Bullish Strategy: MSFU

The Direxion Daily MSFT Bull 2X Shares (MSFU) offers traders a leveraged way to bet on MSFT. MSFU aims to deliver 2x the daily performance of MSFT stock, less fees and expenses. Since its inception, MSFU has attracted substantial trading volume, particularly during earnings seasons.

• Daily objective of 2x exposure to MSFT's performance
  • If Microsoft stock goes up 1% in a day, MSFU aims to go up 2% (before fees)
  • If Microsoft stock goes down 1% in a day, MSFU will be down 2% (before fees)
• Perfect for traders with high risk tolerance to bet on positive earnings surprises
• Historically sees highest volume in first two days after results
• Most effective for quick trades during strong upward momentum
• Average daily volume exceeds 250,000 shares

Bearish Strategy: MSFD

Direxion Daily MSFT Bear 1X Shares (MSFD) aims to provide daily investment results, before fees and expenses, that are the inverse (-1x) of the daily performance of MSFT stock. MSFD is unleveraged but offers a way to potentially profit from a decline in the price of Microsoft stock without directly short-selling* the stock itself.

• Seeks inverse (-1x) of MSFT's daily performance
  • If Microsoft stock goes up 1% in a day, MSFD would be down 1% (before fees).
  • If Microsoft stock goes down 1% in a day, MSFD aims to go up 1% (before fees).
• Ideal for hedging or playing potential earnings disappointment
• Offers traders utilizing their retirement accounts that forbid short selling (like an IRA or 401(K)) the ability to capitalize on the downward movement of MSFT
• Particularly effective during guidance-driven selloffs
• Tight spreads support quick entry and exit strategies

It is important to remember that (MSFU) and (MSFD) are best suited for short-term trading strategies. Due to their daily rebalancing, their performance may not directly track the expected returns of Microsoft stock over extended periods.

*Short-selling is a trading strategy where investors borrow shares and sell them, hoping the stock price will fall.

Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in MSFT.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.

Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with MSFT and may increase the volatility of the Bull Fund.

Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with MSFT and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to MSFT is impacted by MSFT’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to MSFT at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to MSFT increases on days when MSFT is volatile near the close of the trading day.

Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with MSFT and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to MSFT is impacted by MSFT’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to MSFT at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to MSFT increases on days when MSFT is volatile near the close of the trading day.

Microsoft Corporation Investing Risk — Microsoft Corporation faces risks associated with competition in the technology sector and among platform based ecosystems, including its cloud-based services; the evolution of its business, including the development of its new products and acquisitions, joint ventures and strategic alliances; cybersecurity, data privacy and platform abuses; significant investment may occur on products and services that do not achieve their expected results; operations, including excessive outages, data losses or disruptions of online services; quality or supply problems; legal, regulatory and litigation risks; and the ability to attract and retain talented employees.

Technology Sector Risk — The market prices of technology-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily MSFT Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

Distributor: ALPS Distributors, Inc.

The above is sponsored content. Barchart was paid up to one hundred sixty two thousand dollars for placement and promotion of the content on this site and other forms of public distribution covering the period of January - June 2025.  For more information please view the Barchart Disclosure Policy here.