Tech giant Microsoft (MSFT) is up 25% over the past year, lagging the overall market. Plus, shares are off about 10% from their summer highs. One trader sees shares trending higher into next year.
That’s based on the February $470 calls. With 119 days until expiration, 32,503 contracts traded compared to a prior open interest of 384, for an 85-fold rise in volume on the trade. The buyer of the calls paid $10.20 to make the bullish bet.
Microsoft shares recently traded for about $425, so shares would need to rally by $45, or about 11%, for the option to move in-the-money. The strike price of the option is also right past Microsoft’s 52-week high of $468.35.
The tech giant has held steady operationally, with earnings up 10% over the past year and a 15% increase in revenues. Plus, Microsoft sports a hefty profit margin of 36%.
Action to take: With shares down 10% from all-time highs, long-term investors could start looking to build a stake at current prices or on any drop lower.
At current prices, Microsoft pays a 0.8% dividend, and has a history of increasing its payout over time.
For traders, the February $470 calls play well to a year-end rally into the start of 2025. Traders may be able to get slightly better pricing on the options ahead of any election uncertainty.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.