Options Bulls Double Down on Microsoft Stock Ahead of Earnings

The equity is already up over 30% year-over-year

Digital Content Manager
Jan 21, 2021 at 3:03 PM
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The shares of Microsoft Corporation (NASDAQ:MSFT) are up 0.5% to trade at $225.51 at last check, after Evercore ISI hiked the tech giant's price target to $260 from $250, and added the security to its "tactical outperform list." The analyst in coverage noted the company is poised for its next move higher, and that rewards may outweigh risks from a three-month perspective. In addition, the firm is confident IT spending will increase in 2021, which could generate more upside. This bull note comes just a few days ahead of MSFT's fiscal second-quarter earnings report, due after the close on Tuesday, Jan. 26.

What's more, the tech concern appeared on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest weekly options volume within the last two weeks, with new names to the list highlighted in yellow. More specifically,  614,433 weekly calls, and 316, 686 weekly puts have crossed the tape in the past 10 days.

MAO 0121

On the charts, Microsoft stock has been trading sideways over the past few months, after an impressive surge from a March 23, annual low of $132.52 culminated in a Sept. 2, all-time high of $232.86. Since then, shares have made four attempts at those levels, but overhead pressure at the $225 mark has capped further gains. The security is still receiving support from the 120-day moving average, though, and sports a 36.1% year-over-year lead. 

MSFT 120 Day

Analysts were overwhelmingly bullish toward the security coming into today, with all 22 in question calling it a "buy" or better. Plus, MSFT's 12-month consensus target price of $241.94 is a 7.4% premium to current levels, making today's bull note all the more impressive.   

Lastly, now could be a great opportunity to weigh in on Microsoft stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 30% sits in the extremely low 12th percentile of its annual range. In simpler terms, options players are pricing in low volatility expectations at the moment.


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