Bullish Betting Ramps Up as Microsoft Holds Near Highs

Evercore ISI raised its MSFT price target over the weekend

Sep 9, 2019 at 2:25 PM
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Microsoft Corporation (NASDAQ:MSFT) has been an attractive target for options bulls in recent months. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have bought to open 2.22 calls for each put in the last 50 days. What's more, this ratio ranks in the 93rd annual percentile, meaning the rate of call buying relative to put buying has been quicker than usual.

Drilling down, the September 145 call has seen the biggest increase in open interest among front-month stocks over the last two weeks. Those that bought to open these short-term calls expect MSFT to break out above $145 -- well above its July 26 record high of $141.67 -- by expiration at the close next Friday, Sept. 20.

It's a similar backdrop in today's trading, with calls outpacing puts by a nearly 2-to-1 ratio. The weekly 9/13 140-strike call is most active, and it looks like new positions are being purchased here for a volume-weighted average price of $0.49. If this is the case, breakeven for the call buyers at the close this Friday, Sept. 13, is $140.49 (strike plus premium paid).

At last check, the Dow stock was trading 1.5% lower at $137.03. Today's downside comes as broader tech sector weakness offsets a price-target hike to $160 from $150 at Evercore ISI. The $136.50 region is emerging as support for MSFT, while just below here is a familiar foothold at its 80-day moving average, perched at $134.50.

msft stock daily price chart on sept 9



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