Options Traders Bet On Bullish Reaction To Microsoft Earnings

Microsoft Corp MSFT made a new all-time high on Friday and on Monday entered into consolidation. The tech giant is set to print its fourth-quarter 2021 earnings after market close on Tuesday and three analysts are bullish going into the event.

Citi maintained a buy rating and raised the price target from $310 to $378, KeyBanc reiterated an Overweight rating and increased the price target from $305 to $330. Wedbush is expecting Microsoft to beat on its earnings and raise guidance.

On Monday it appears as though options traders are also expecting a beat and believe Microsoft will rally higher after its earnings print. Together the traders purchased over $2.5 million worth of bullish Microsoft call contracts, with a number choosing an expiry of July 30.

Trading options through earnings is an especially risky move because a stock price can sell off even if the company posts a beat, or rise after a company reports a miss. Options traders also have to take implied volatility (IV) into consideration. The IV for Microsoft options expiring this Friday is currently sitting at 3.22%.

See Also: What To Watch For When Apple, Microsoft And Google Report Earnings Tuesday

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The MSFT Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 9:43 a.m., a trader executed a call sweep near the ask of 243 Microsoft options with a strike price of $270 expiring on Sept. 17. The trade represented a $525,852 bullish bet for which the trader paid $21.64 per option contract.
• At 10:13 a.m., a trader executed a call sweep near the ask of 232 Microsoft options with a strike price of $292.50 expiring on July 30. The trade represented a $58,464 bullish bet for which the trader paid $2.52 per option contract.
• At 10:45 a.m., a trader executed a call sweep near the ask of 292 Microsoft options with a strike price of $330 expiring on Oct. 15. The trade represented a $25,988 bullish bet for which the trader paid 89 cents per option contract.
• At 10:47 a.m., a trader executed a call sweep near the ask of 242 Microsoft options with a strike price of $300 expiring on Sept. 17. The trade represented a $87,120 bullish bet for which the trader paid $3.60 per option contract.
• At 10:47 a.m., a trader executed a call sweep near the ask of 256 Microsoft options with a strike price of $285 expiring on Oct. 15. The trade represented a $314,880 bullish bet for which the trader paid $12.30 per option contract.
• At 10:51 a.m., a trader executed a call sweep near the midpoint of 618 Microsoft options with a strike price of $285 expiring on Oct. 15. The trade represented a $760,140 bullish bet for which the trader paid $12.25 per option contract.
• At 10:58 a.m., a trader executed a call sweep at the ask of 280 Microsoft options with a strike price of $285 expiring on Oct. 15. The trade represented a $344,400 bullish bet for which the trader paid $12.30 per option contract.
• At 11:00 a.m., a trader executed a call sweep at the ask of 271 Microsoft options with a strike price of $285 expiring on Oct. 15. The trade represented a $326,555 bullish bet for which the trader paid $12.05 per option contract.
• At 12:06 p.m., a trader executed a call sweep at the ask of 740 Microsoft options with a strike price of $305 expiring on July 30. The trade represented a $33,300 bullish bet for which the trader paid 45 cents per option contract.
• At 12:06 p.m., a trader executed a call sweep at the ask of 876 Microsoft options with a strike price of $305 expiring on July 30. The trade represented a $40,296 bullish bet for which the trader paid 46 cents per option contract.