Microsoft Investors Position for More Upside as Stock Nears Bull Market

$Microsoft(MSFT)$   investors, traders and speculators are positioning for more upside potential in the software giant, signaling expectations that the company's next quarterly financial results will impress Wall Street.

Call options that give their holder the right to buy Microsoft shares at $445 by May 15 attracted the biggest volume among options tied to the software giant Friday except for the zero-days-to-expiration (0DTE) contracts. That expiration date is about two weeks after the company is scheduled to release its next quarterly earnings. The strike price is more than $22 above the current stock price of $422.65.

The stock has risen about 19% from an almost one-year low on March 27. If the gains extend to 20% at market close, that would meet the common definition of a bull market. Before the recent gains, the stock has fallen more than 27% this year through that low last month, sending the tech giant into a bear market amid a wider selloff among software stocks that was aggravated by declines across the stock market as a result of fears over the war in Iran.

Those worries are now fading, fueling gains across the stock market after Iran announced that the Strait of Hormuz is now "completely open" for commercial traffic, clearing the chokepoint that has disrupted the flow of about 20% of the global oil supply.

Yesterday, Stellantis said it is modernizing its infrastructure using Microsoft Azure, targeting a 60% reduction in datacenter footprint by 2029. Stellantis had an initial rollout of 20,000 licenses of Microsoft 365 Copilot supporting select roles as part of a five-year collaboration.

"AI is fueling growth across MSFT's ecosystem, with Microsoft 365 Copilot seat additions rising 160% to 15M paid seats and GitHub Copilot subscribers growing 75% to 4.7M," CFRA analyst Angelo Zino wrote in a note days before the Stellantis announcement. "We see Azure continuing strong growth as NVIDIA's Blackwell platform ramps and enterprise migration to the cloud accelerates."

More than 41,720 of those $445 call options expiring May 15 changed hands in New York, compared with open interest of 57,970. At current prices and volatility, those contracts have a less than 25% profit probability for the buyer. Microsoft shares would need to climb above the breakeven level of $453.90 before the contract expires for the buyer to make money from that trade.

If the stock does surge above that breakeven level, the maximum profit potential could be unlimited, depending on how high Microsoft shares go. If it doesn't, and the call option expires worthless, the maximum loss potential could reach $890 per contract. Each contract covers 100 shares.

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