Unusual Options Activity: Microsoft (MSFT)

Tech giant Microsoft (MSFT) has been a strong performer this year, but shares have been hit in recent weeks. One trader sees shares bouncing higher in the months ahead.

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  • That’s based on the November $280 calls. With 87 days until expiration, 22,514 contracts traded compared to a prior open interest of 391, for a 58-fold rise in volume on the trade. The buyer of the calls paid $45.45 to make the bullish bet.

    Shares recently traded at $316, so the option is already about $36 in-the-money. Microsoft has a 52-week high of $366. So, it’s possible the option could rise as much as $50, or just more than double, if the price gets back to the high set last month.

    Microsoft is still up over 10 percent in the past year, outperforming the stock market by a 3-to-1 ratio. Earnings and revenue growth remain strong, and the tech company sports a massive 34 percent profit margin.

    Action to take: Investors may like shares at current prices, or on any drop lower. Shares currently yield about 0.9 percent, and Microsoft has grown its dividend in recent years.

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  • For traders, the November calls can likely see mid-to-high double-digit returns before expiration. Traders with less capital can look at November calls with a higher strike price to take advantage of a likely bounce in shares in the weeks ahead.


    Disclosure: The author of this article has no position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.