Investors Eye New Microsoft Options: Key Insights on Calls and Puts

New Options for February 28th Expiration Unveiled

Today, Microsoft Corporation (Symbol: MSFT) introduced new options set to expire on February 28th. Stock Options Channel has analyzed the options chain, highlighting one put and one call contract that warrant attention.

The put contract at the $420.00 strike price currently has a bid of $11.65. If an investor sells to open this put, they agree to purchase the stock at $420.00. However, by collecting the premium, the effective cost would be $408.35 per share (excluding broker fees). For those considering buying shares of MSFT, this option may provide a more appealing entry point compared to today’s stock price of $425.62.

Since the $420.00 strike is about a 1% discount to the current trading price of the stock, it has the potential to expire worthless. Current analytics suggest there is a 59% chance of this outcome. Stock Options Channel will monitor these odds continuously, presenting updates on their website under the contract detail page for this option. Should the contract expire worthless, the premium would yield a 2.77% return on the cash commitment, or an annualized rate of 19.85%—what we refer to as YieldBoost.

Below is a chart displaying the trailing twelve months of Microsoft’s trading history, with the $420.00 strike indicated in green:

Analyzing Call Options: Potential Gains Ahead

On the call side of the options chain, the contract at the $430.00 strike price has a bid of $14.25. If an investor purchases MSFT shares at the current price of $425.62 and opens this call as a “covered call,” they are agreeing to sell at $430.00. Including the premium collected, this would represent a total return of 4.38% if the stock is called at the February 28th expiration (excluding any dividends and brokerage fees). However, investors should note the potential for missing out on extra gains if MSFT’s shares rise significantly. Therefore, reviewing the past twelve months of trading history and the company’s fundamentals is vital.

Here’s another chart reflecting MSFT’s trading history over the past year, with the $430.00 strike marked in red:

As the $430.00 strike price stands approximately 1% above the current stock price, there is a chance the covered call may also expire worthless. If that occurs, investors would retain both their shares and the premium earned. Current analytical insights point to a 51% likelihood of this happening. Stock Options Channel will keep track of this probability, providing updates on our website, including a chart of the option contract’s trading history. Should the covered call contract expire worthless, the premium would yield an additional 3.35% return for the investor, or an annualized return of 23.96%, another illustration of YieldBoost.

The implied volatility of the put contract stands at 24%, and the call contract’s implied volatility is at 25%. In contrast, the historical trailing twelve month volatility—calculated from the last 251 closing values plus today’s price of $425.62—is at 20%. For additional options contract insights, visit StockOptionsChannel.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.