Unusual Options Activity: Microsoft (MSFT)

Shares of tech giant Microsoft (MSFT) have traded down over the past few weeks, in line with the broader market. One trader sees a possibility for a rebound back to the company’s old all-time highs in the next month.

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  • That’s based on the November 5th $310 calls. With 31 days left on the clock, over 3,800 contracts traded, a 33-fold rise in volume from the prior open interest of 116 contracts. The buyer of the calls paid $2.01 for the trade.

    The tech giant’s various divisions have been operating strongly over the past year, with revenues up 21 percent and earnings up 47 percent. Besides the strong growth is strong profitability, as the company recently reported a 36 percent profit margin.

    Action to take: Investors may like shares here. The recently-raised dividend and pullback in share price has put the yield just under 0.9 percent. That’s not huge, but the company has been good about growing its dividend over time. And with double-digit growth, this is a name that can fit into any investment portfolio.

    For traders, the rebound play looks reasonable given September’s market shakeout. While there may still be some market volatility in the days ahead, the resolution of the current market fears will set up stocks for a rebound in the coming weeks.

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  • Look for mid-double-digit gains on this trade, as the $310 strike price means shares would need to rally another $4 beyond their prior all-time high this year.

    Traders with a lower risk tolerance may want to use a strike date further out, like in January.

     

    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 of the companies mentioned in this article.

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