Unusual Option Activity: Microsoft (MSFT)

Tech giant Microsoft (MSFT) is trading near all-time highs after soaring 52 percent over the past year. One trader sees shares making a quick pullback in the coming weeks.

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  • That’s based on the March 1 $410 puts. With 21 days until expiration, 13,305 contracts traded compared to a prior open interest of 254, for a 52-fold rise in volume on the trade. The buyer of the puts paid $5.50 to make the bearish bet.

    Microsoft shares recently traded for about $415, meaning the stock would need to drop by $5, or about 1 percent, for the option to move in-the-money. For a tech stock, a down day could easily send shares down 3-5 percent.

    The company is performing well, but shares may have gotten too far ahead of themselves as the S&P 500 nears the 5,000 level.

    Seasonally, stocks tend to pull back into February and March, especially after they have a rally during the holiday months.

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  • Action to take: investors interested in Microsoft may want to hold off for now, as there will likely bet better buying opportunity in the coming weeks.

    Shares will also trade ex-dividend on February 14, which will also work to lower the share price.

    For traders, the March 1 $410 puts are well positioned for a quick mid-double-digit gain from a small pullback in shares in the weeks ahead.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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