Debit Call Spread On Microsoft (MSFT)
$Microsoft(MSFT)$ shares rose by 1.06% and close at $356.53. The options trading volume is 0.39 million. 64.7% of the whole trading volume was call contracts.
Technicals are showing an uptrend. There have been positive news coming from OpenAI, it allows users to build custom versions of ChatGPT to complete specific personal and professional tasks to defeat competitors in an increasingly crowded market.
At the Developers conference on Monday, OpenAI announced a new option, users can quickly create their own dedicated version of ChatGPT, which can be used to help teach kids math or explain the rules of board games. The other advantage would be no programming required to use it, this is good news for people who does not have a programming background to embark on ChatGPT.
This month, we can look forward to a store by OpenAI which will allow users to find customized GPT for other users and earn revenue through their own GPT, similar to buying apps on Apple's App Store.
There is also plan to launch a preview version of the latest GPT-4 Turbo, a more powerful and faster version of the large language model that supports the company's technology.
In this article, I will be sharing on how I am planning to take advantage of this bullish outlook coming from OpenAI to benefit Microsoft, and will be using the Debit Call spread strategy for Options.
MSFT Debit Call Spread: 30-Day Maturity, ATM to +5%
MSFT Call Spread Benchmark Index (30-Day Maturity, ATM to +5%) is unchanged today at 1.7% premium to stock price.
This value is below its 52-week average premium of 1.9%.
How I would trade this Strategy
Currently, Microsoft last close price as of 06 Nov 2023 is $356.53, I will be using this contract that expiration date is 32 days away on 08 Dec 2023, I will make one leg to buy a call on the $355 strike for $10.45.
I will add another leg - sell a call at $360 strike for $6.15.
The initial cost of the Debit Call strategy would be $4.30 ($10.45-$6.15). In order for me to make a profit from this strategy, the stock price would need to move higher than $359.30, which is calculated from long strike ($355) plus cost of the spread ($4.30).
My maximum gain would be realized if the stock moves above the $355 strike. Hence, my call spread would be worth $5 and my cost was $4.30. This will net me a profit of $0.70.
The break-even point is $359.30. (Strike A (Long Call) + Cost)
Summary
With the positive news from OpenAI, and Microsoft own Azure AI, Microsoft have improve their position to capture more market share in this space.
I think there is potential of a significant upside coming within the next 30 days. I will be doing the debit call spread.
Appreciate if you could share your thoughts in the comment section whether you think Microsoft can continue its upside as we are expecting more positive news from Microsoft and OpenAI.
@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Modify on 2023-11-07 19:44
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I think there are a lot of people on this board that probably should go back to their coloring book! MSFT is for the next many years make us a lot of cash!
MSFT= THE AI leading company. That's it folks, don't over complicate it.