Weekly Options Traders Target Microsoft, Amazon Stocks As Earnings Loom

Option traders are preferring calls for tech stocks MSFT and AMZN

Managing Editor
Oct 23, 2017 at 12:51 PM
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Options trading has been heavy on the Chicago Board Options Exchange (CBOE), with volume on Friday reaching its highest point since the Presidential Election. Tech powerhouses Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN) are two companies with notable options volume, and both happen to report earnings later this week. Here's a closer look at how options traders have been placing their bets on MSFT and AMZN stocks.

The 20 stocks listed in the table below have attracted the highest total weekly options volume during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

MAO Oct 23

Options Bulls Honing In On Microsoft Stock

Microsoft stock is currently up 0.2% to trade at $78.96 and earlier today touched a new record high of $79.19. It's been an outstanding year for MSFT stock, which has tacked on 32.7% year-over year. The shares have carved out a path of higher highs all year, with pullbacks contained by the 80-day moving average.

Analysts are firmly in MSFT's corner. Of the 22 brokerages covering the software name, 16 rate the shares a "strong buy." Still, MSFT's average 12-month price-target of $81.35 is right in line with the current share price, so an earnings beat could lead to price-target hikes.

Microsoft options traders have shown a distinct preference for weekly calls over weekly puts in the past two weeks, with 161,981 of the former and 70,854 of the latter exchanged. However, put buying has actually been more popular than normal. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and the NASDAQ OMX PHLX (PHLX), MSFT sports a 50-day put/call volume ratio of 0.65, which ranks 2 percentage points from a 52-week high.

Looking at today's trading, it certainly appears some traders are expecting an end-of-week breakout from the blue chip. Specifically, buy-to-open activity looks likely at the weekly 10/27 83-strike call, which would signal expectations for the security to continue is ascent on the charts before the contracts expire this Friday.

Options Bulls All Over Amazon Stock

As the company reviews bids for where to build its second headquarters, Amazon.com stock is currently down 1.2% to trade at $971.04. While the shares have pulled back since their July 27 record high of $1,083.31, they seem to be finding support at a trendline connecting higher lows since last November.

Short sellers are starting to take aim at AMZN stock in the meantime. Short interest increased by 30% during the last two reporting periods to 6.34 million shares, its highest point since December.

Options traders have preferred calls over puts in the past two weeks, with 156,657 weekly calls exchanged to 120,854 weekly puts. This is reinforced by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where AMZN has racked up a 50-day call/put volume ratio of 1.12, which ranks in the 92nd percentile of its annual range.

Digging deeper, the November 1,100 and 1,000 calls are home to peak front-month open interest. Anyone who bought to open these contracts expect Amazon stock to surge higher on the charts over the next month.

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