Weekend Trader Series
August 14, 2022
Open Positions Update
- The Garmin (GRMN) October 21, 2022, 115-strike put reaches its time-stop this Monday, August 15. Close the position at a limit price within range of the current market price when you place the order.
The following is this week's recommendation:
Microsoft (MSFT)Place a limit order to buy the Microsoft (MSFT) October 21, 2022 280-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, August 12, this option was offered at $21.50. MSFT closed at $291.91 on Friday, August 12.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, September 12, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Tech giant Microsoft (MSFT) enjoyed a breakout above a trendline connecting lower highs since this year's peak in January. The shares just retested the breakout level late last week as well and then gapped higher on Wednesday. Considering this upbeat technical setup, now might be a good time to bet on even more upside for MSFT with options.
Per a recent Monday Morning Outlook from Schaffer's Senior V.P. of Research Todd Salamone discussing the Nasdaq 100 (NDX) this improving technical outlook is even more intriguing on the heels of the May 30 cover of Bloomberg BusinessWeek magazine entitled "The Great Tech Rout."
That being said, the security isn't highly shorted at the moment, but short interest saw a nearly 40% surge from March to mid-June. The trough the shares saw during this time period lined up with this peak in short interest, which is still 25% above its 2019 lows. Additionally, Dan Niles revealed he was short MSFT in July -- a knee-jerk reaction to Microsoft stock's selloff, which was followed by an immediate recovery.
Finally, our recommended October 280 call has a leverage ratio of 9.0 and will double in a 10.7% pop in the underlying equity.
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