Microsoft Corporation (NASDAQ:MSFT) reports earnings next week, July 19, 2016 and it seems some heavy bets have been made by some potentially “savvy” traders or investors as the call options volume has exploded days before Microsoft is due to report.
OptionMONSTER’s tracking program detected the purchase of more than 14,000 July 54 calls for $0.11 to $0.22. Volume was more than 10 times the open interest at the strike, showing that these are new positions. Separately, 11,000 Weekly 54.50 calls expiring on July 22 were bought mostly $0.79 to $0.93 in volume far above that strike’s open interest of 941 contracts.
Long calls lock in the price where investors can buy stock, allowing them to profit from a rally with limited capital at risk. Their cheap cost can also generate significant leverage on a percentage basis if shares move in the right direction.
Sometimes however, a stock can move in the expected direction, but due to Implied Volatility drop-which is typical after earnings get released, the options can still expire worthless.
The Chart With Technicals
Above is the Microsoft daily price chart going back to the beginning of 2016. Please note the highlights on the chart with detailed observations regarding support and resistance.
Analyst Comments
Nomura (NYSE:NMR) analyst Frederick Grieb and his team reiterated a Buy rating and $65 price target on the stock Thursday. Grieb writes that the company’s Productivity and Business Process and Intelligent Cloud should turn in a strong performance, while personal computer results log more moderated declines. His surveys of resellers suggests that Microsoft came in above plan in the quarter. In addition, they were upbeat about Office 365 model transition, as 71% of respondents said that customers are adopting the new software at a faster pace than a year ago. With Microsoft’s free upgrade to Windows 10 coming to an end on July 31, 2016, the operating system has been installed on 350mn devices as of June 29. At the Build Conference in March, the company noted that Windows 10 initial adoption outpaced Windows 7 by 145%. Our checks around the new OS have been positive and we expect PC shipment declines will moderate as we go through 2016.
We expect investors to continue to be focused on the Office model transition, with Commercial billings growth and Commercial Cloud growth the key metrics to gauge the strength of the underlying business as well as the progress of the business model transition.
Additionally, operating expenses will also remain in focus as we continue to expect operating expenses to come in below expectations, driven by more stringent cost control.
Company Profile
Microsoft Corporation, a technology company, develops, licenses, and supports software products, services, and devices worldwide. The company’s Devices and Consumer (D&C) Licensing segment licenses Windows operating system and related software; Microsoft Office for consumers; and Windows Phone operating system. Its Computing and Gaming Hardware segment provides Xbox gaming and entertainment consoles and accessories, second-party and third-party video games, and Xbox Live subscriptions; surface devices and accessories; and Microsoft PC accessories. The company’s Phone Hardware segment offers Lumia phones and other non-Lumia phones. Its D&C Other segment provides Windows Store and Xbox marketplace; search advertising; display advertising; Office 365 Home and Office 365 Personal; first-party video games; and other consumer products and services, as well as operates retail stores. The company’s Commercial Licensing segments licenses server products, including Windows Server, Microsoft SQL Server, Visual Studio, System Center, and related Client Access Licenses (CALs); Windows Embedded; Windows operating system; Microsoft Office for business, such as Office, Exchange, SharePoint, and related CALs; Microsoft Dynamics business solutions; and Skype. Its Commercial Other segment offers enterprise services, including premier support services and Microsoft consulting services; commercial cloud comprising Office 365 Commercial, other Microsoft Office online offerings, Dynamics CRM Online, and Microsoft Azure; and other commercial products and online services. The company markets and distributes its products through original equipment manufacturers, distributors, and resellers, as well as through online and Microsoft retail stores. Microsoft Corporation was founded in 1975 and is based in Redmond, Washington.– YahooFinance