Microsoft (MSFT) – Recent Tech Sell-Off Offers a Buying Opportunity
The following two articles offer compelling reasons why MSFT could move higher. The first is an analyst upgrade with a price target of $240 - Microsoft Stock (MSFT) Gets Price Target Increase To $240 From Mizuho. The second article outlines MSFT’s competitive advantages - 2 Tech Stocks That Are Thriving Despite the Coronavirus.
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Technicals
We offered a trade idea in MSFT at the start of August and the option spread used in the idea expired for a 74% profit on Friday. Because of the decline over the past few days, the stock is once again testing the same trendline that made the trade attractive last time around. The 50-day moving average is also in play and this is an indicator the stock has not closed below in over four months. Friday’s candlestick formation signals buying activity and that the support confluence is being defended, at least so far.
*source Tradingview.com
If you agree there's further upside ahead for MSFT, consider this trade which relies on the stock remaining above $212.50 through expiration on October 9.
Buy To Open MSFT 09OCT20 210 Puts (MSFT201009P210)
Sell To Open MSFT 09OCT20 212.5 Puts (MSFT201009P212.5) for a credit of $1.20 (selling a vertical)
This credit is $0.02 less than the mid-point of the option spread when MSFT was trading near $214. Unless the stock rallies quickly from here, you should be able to get close to this amount.
Your commission on this trade will be only $1.30 per spread. Each spread would then yield $118.70. This reduces your buying power by $250 and makes your investment $131.30 ($250 – $118.70). If MSFT closes at any price above $212.50 on October 9, both options will expire worthless, and your return on the spread would be 90% ($118.70 / $131.30), or 1027% annualized.
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Kyle Dennis took a leap of faith and decide to invest his savings of $15k - $2.8 Million later, he owes his success to these strategies during volatile markets.
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Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry
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Any questions? Email Colin@terrystips.com
You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Colin@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you up for our Premium Service package ($97 monthly subscription). You get 3 months ($291 worth) of services without paying us one penny.
I look forward to having you on board, and to prospering with you.
Terry
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