Microsoft $38M Call Buying — Full Breakdown & Transcript

[00:06] noise where we take a look at unusual options activity on the tape and ask what the market is saying beneath the move. This episode's name is one that has been running up the scoreboard this week. Microsoft, which had a big pop

[00:20] after its earnings report, up 15.5% in one session, went from 390.54 up to Options ahead of time are pricing in a 6.2% move, so the market underpriced the reaction by about two and a half times. So, this was a massive miss by the

[00:34] options market in a stock that is this deep and this liquid. But, then the buyers came in. About 38 million in Microsoft calls printed into report. That's the key point. The call buying was not before the move had

[00:49] occurred. This was call buying after the stock had added about 38 million in Microsoft calls printed after the close. And I think that's really the key point the move, before the earnings were made. These were made after the stock had

[01:02] already added roughly 260 billion dollars of market value here. The biggest trades that we have in front of us though aren't in the next few weeks. We're going to have to go take a look out into September. The biggest trade

[01:14] that we see actually goes out to September 18th here. 49 days to expiration, the 470 call. 4% out of the money, the premium 18.4 million spent money, the premium 18.4 million spent and implied volatility of only 31%. 88%

[01:27] real follow-through bet here. A little bit shorter dated though, we have a second trade, the September 4th 3 uh excuse me, 465 calls. Those are 35 days to expiration with 3% out of the money here. The premium 17.2 million paid also

[01:42] at 31% implied volatility. We see 91% coming at the ask. So, this is the heart of the tape after the Microsoft earnings report in terms of major call volume. They are definitely close enough to at the money to still matter. They are far

[01:55] enough out to give time its needed well time to work. And we see that they're being bought aggressively after a historic post earnings move. There is a smaller October 16th call sitting out at $500 or should say at 490 instead for

[02:10] $500 or should say at 490 instead for 2.42 million. 77 days to expiration, 9% volatility in this trade was about 30% when it was put on here. So, if we're going to break this down, you have your September calls looking for continuation

[02:23] right now. You have an October call effectively looking for analysts to institutional upgrades from the street, for example, to raise their price targets back in Microsoft could generate new interest among certain crowds of

[02:36] people. So, the tradeable levels around here are pretty simple, right? We have 465 to 470 as the first confirmation zone right now in Microsoft. If area here where we're finding ourselves trading at the end of this current week,

[02:49] then you have a good shot at these September earnings calls being in play. Why do we say that here? were to take a step back to our daily chart right now, the June high comes in at 466.32. Breaching that June high, the swing high

[03:02] that really continued that series of lower highs and lower lows would signal that this market has found a legitimate durable bottom here. And so, when you possibility, clearing major resistance right now, chewing through that

[03:14] the market would offer greater confidence that with a few weeks ago talking, that these calls could actually see some action right now. But if we see this move fail up here, 465 or so, and it dips back into 430, we're going to

[03:29] Losing that 1-week moving average could be a signal that the market is done with this particular catalyst and ultimately, even if those call buyers have a good even if those call buyers have a good idea, it's might be ill-timed. Microsoft

[03:42] some more effort, if you will, more technical with the chop and more importantly, more narrative news to climb over as the AI hyperscaler debate rages on. But this is why the setup is interesting here. The buyers definitely

[03:54] aren't getting a discount when they pay in this tape. Maybe they are because volatility's in a little bit, but you're buying at the top of a range after a significant gap. So, for this trade to actually work, we're going to have to

[04:06] repricing here henceforth that this was the beginning of a new range of trading that carried us to the top of a predefined price level, and now this is as good as it gets in the short term. Effectively, the narrative, the

[04:21] zeitgeist around Microsoft needs to change here. But, the concern previously money on its AI CapEx in the short term with a payoff that was still too far point over the course of this week, we've been talking about proof of work

[04:33] versus proof of concept of work. Microsoft numbers gave the print that here. We got the revenue growth, the back log growth. We see the Copilot forward here. But, there was some spending relief included as well. CapEx

[04:48] landed at $41 billion below the $42 billion that investors were pricing in, and the calendar 2026 guidance moved down to about $175 billion from $190 spending money, but they're showing fiscal restraint, and with their Azure

[05:03] dollar in doing it. So, this is why the stock moved the way that it did. Microsoft didn't just tell the market that AI domain was strong. It actually AI spending is starting to convert into

[05:15] expenditure outlook got a little bit less scary, which has been one of the big issues here in recent weeks and months. So, here is the important point about all of this background for the Microsoft call. Call buyer doesn't need

[05:28] henceforth. It just needs the market to keep rerating the stock as if a new regime, a new understanding of pricing has actually become more believable. And a little bit more sense as opposed to looking for something that was like a

[05:42] even going out next week to August 7th or August 14th. You need to give this market a little bit of room to breathe here. So, here's the signal versus noise setup for today, folks. And we want your opinions in the chat below. The signal,

[05:55] in my view, is the structure and the timing of this. Traders are buying 38 a close after a 15.5% day. The two largest trades were near the money, dated into September, and bought at the ask. That

[06:08] says buyers thinks the earning gap is going to extend. What we've seen here the past few sessions is durable. But, the noise may be the point, right? The stock had already had the move. Anyone buying after 260 billion-dollar market

[06:21] cap gain is accepting risks that the easy part of the leg higher has already been accomplished. So, we're going to watch 465 to 470. Here's where we're chewing through on the charts right now on this Friday, July 31st. Through 470,

[06:33] the path to these calls printing is a lot cleaner. If we get pinned here and week, maybe you may want to think about rolling or for going a different time chat? Let us know below. What's the signal versus noise on these Microsoft

[06:47] course, below on our YouTube page, where you should like and subscribe for more videos and trade ideas that you see in bits like this. Signal versus noise, of and subscribe for more content. We'll catch you next time.