Microsoft Corporation (NASDAQ:MSFT) shares are up 48.2% in the past year due in large part to impressive growth numbers from its booming Azure cloud business.
Microsoft reported another strong earnings report in May, and at least one large bull is betting the Microsoft rally has legs.
The Microsoft Trades
On Thursday morning, Benzinga Pro subscribers received 31 option alerts related to unusually large Microsoft option trades. Here are some of the largest:
Of the 31 total large Microsoft option trades on Thursday morning, 13 were calls were purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. An additional 14 trades were calls sold at the near the bid or puts purchases at or near the ask, trades typically seen as bearish. The remaining trades were executed near the midpoint of the bid-ask spread, trades typically considered neutral.
Why It's Important
Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader. Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.
Unfortunately, stock traders often use the options market to hedge against their large stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large sizes and the timing of the biggest Microsoft option trades, there’s certainly a possibility they represent institutional hedging.
Path To $2 Trillion?
Microsoft’s Skype and Teams video conferencing platforms have gotten a huge boost in demand from the economic shutdown, and the work-from-home environment has also generated booming demand for cloud services. In other words, while other companies are struggling to survive, Microsoft is one of the few COVID-19 winners.
Even the younger generation of speculative traders on Robinhood seem to recognize the long-term investment opportunity in Microsoft. Robinhood traders have gotten a lot of criticism for betting on high-risk stocks and even bankrupt companies in the past two months, but Microsoft is one of the 10 most widely held stocks among Robinhood users.
Benzinga’s Take
While there were more than 30 relatively large Microsoft option trades on Wednesday morning, all eyes were on that massive $11.2 million call purchase. Those calls have a break-even price of just $199, suggesting at least 1.5% additional upside over the next seven months.
Do you agree with this take? Email [email protected] with your thoughts.
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