Bull Put Spread Provides Opportunities for Long-Term Microsoft Bulls

Core Viewpoint - Microsoft (MSFT) has experienced significant selling pressure recently but remains above the 50-day moving average, indicating some resilience in its stock performance [1]. Analyst Ratings - Analysts maintain a positive outlook for MSFT stock, with 41 Strong Buy ratings, 5 Moderate Buy ratings, and 2 Hold ratings, reflecting strong confidence in the company's future performance [3]. Options Strategy - A bull put spread trade is being considered for MSFT, focusing on a longer-term expiration rather than a regular monthly one. This strategy allows for adjustments over time but typically results in lower annualized returns [5]. - The maximum profit for a bull put spread is limited to the premium received, while the maximum potential loss is capped. The calculation for maximum loss involves the difference in strike prices minus the premium received [6]. Implied Volatility - The current implied volatility for MSFT is at 21.43%, with an IV Percentile of 47% and an IV Rank of 14.27%, indicating moderate market expectations for future volatility [7]. Trade Example - A potential bull put spread could involve selling a June 18 put with a strike price of $430 and buying a $420 put, trading around $1.40. This would yield a premium of $140 with a maximum risk of $860 [8]. - This trade represents a 16.28% return on risk if MSFT stock remains above $430 until expiration [9]. Breakeven Analysis - The breakeven point for the bull put spread is calculated at $428.60, which is $430 minus the $1.40 option premium per contract. This price is approximately 17.10% below Monday's closing price [11][12]. Risk Management - A suggested stop loss for the bull put spread could be set at the premium received, around $140, or based on a key chart level, such as $460, which aligns with the current 200-day moving average [14].