Carter Worth And Mike Khouw's Microsoft Trade

Carter Worth of Cornerstone Macro shared with the viewers of CNBC's "Options Action" his bullish technical analysis on Microsoft MSFT. The company is going to report earnings on Tuesday and Worth thinks the stock is going higher.

Microsoft is in an uptrend, but its relative performance to Invesco QQQ Trust Series 1 QQQ is poor since 2020. Recently, its relative strength improved as the stock broke the downtrend line of its relative performance to QQQ. Worth is a buyer of the stock going into earnings.

See also: How To Buy Microsoft Stock

Mike Khouw wants to use options to make the trade in Microsoft. He wants to buy the July $270 call for $7 and sell the April $270 call for $1.30. The trade would cost him $5.70. He is hoping the stock is going to stay below $270 at the April expiration and then move higher, above $275.70. If the April call expires worthless, Khouw can sell another call to lower the breakeven.

Khouw decided to use the strategy because the stock usually has muted moves on earnings.