Microsoft Stock Finds Immediate Chart Support After Event Pullback

The top open interest position on MSFT is in the October series

by Josh Selway

Published on Oct 3, 2019 at 12:46 PM

Microsoft Corporation (NASDAQ:MSFT) fell sharply yesterday during the company's annual hardware event, at which it unveiled a number of new products, including a foldable smartphone. But the Dow component is trading up 0.8% at $135.75 today, bouncing from the 120-day moving average. This obscure trendline has actually proven to be an important level for Microsoft, since data from Schaeffer's Senior Quantitative Analyst Rocky White shows the four previous signals of this type have each produced one-month gains for the security, with an average rise of 5.3%.

msft stock oct 3

In the meantime, options traders have continued to bet bullishly, meaning they could cash in if the stock does rally. The security's 50-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is up to 2.53, putting it in the 99th annual percentile.

Looking closer, peak open interest is in the front-month October series at the 140 call. Data confirms the majority of positions of these positions were bough to open, so many short-term traders are well positioned to profit on a one-month rise in MSFT shares.

In today's trading, though, the most popular option is the October 132 put, where it looks like traders could be selling to open positions. If that's the case, they're betting on the $132 region to serve as a floor in the weeks ahead. But for those buying premium, it's getting a bit pricey, based on the 30-day at-the-money implied volatility of 30.1%, which ranks in the 84th annual percentile. 

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