To The Moon

Perhaps because of the Treasury issue, traders are so busy with the VIX that it's rare to see the big stock order, by which I mean one that can determine the direction of the future.

On May 9, there was a set of spread strategies (Sell in May? Sell put in May!) , is bullish on MSFT into September, but the volume is not heavy (only a few million) compared to previous trading and shows a lack of confidence in the stock rally (sell call hedge buy call) :

But as the Treasury saga unfolded and more information became available, Wall Street bosses began to let loose:

buy $MSFT 20230915 300.0 CALL$

This order is very generous, with traders buying calls with a Sept. 15 expiration date and a strike price of 300 for a total of $80 million. Options are trading at 32, meaning traders are looking for a September price above 332. At the current price of 317, Microsoft would need to gain 5 percent in four months.

There's another close order on it $MSFT 20230616 215.0 CALL$ . I highly suspect it's the same person. It's a very common practice to close an expiring option and roll the next one.

Why am I so sure of this trader's perspective? Let's look at the behavior of the large order with a strike price of 215:

As can be seen from the figure, 17,500 lots of orders were placed in two times. The first order was placed on January 30, when 12,500 lots were purchased. The transaction price was calculated at 36, and the total transaction amount was 45 million.

On March 16th, 5000 lots were bought again. If the transaction price was calculated as 60, the total transaction amount would be 30 million. The total cost of the two times is 75 million. On May 24, 17,500 lots of positions were closed, with a total turnover of 182 million yuan, up 2.4 times.

On the face of it, the reason for the trader to close his position was simple. The option was about to expire. After closing the position, he took the 80 million profit and continued to roll $MSFT 20230915 300.0 CALL$.

Although playing with the profit portion lacks a sense of seriousness, because the principal has been preserved. From the perspective of AI development this year, Microsoft will not fall anywhere, even if the stock price falls in September or before September, the option price is discounted by half, as long as the timely liquidation can keep the profit of the bet, there is no need to worry too much.

He chose to continue to buy ITM call rather than sell ATM put, which shows that traders are still relatively confident in the direction of the stock price. Microsoft up 5% in 4 months isn't that crazy of an expectation.

Of course, I think the most important implication of this big deal, and the one that is most important to all of you here, is that there is probably not going to be a decent pullback for Microsoft in the next four months. call buyers afraid of time loss, but more afraid of deep callback, psychological burden is very big.

If Microsoft doesn't have a decent pullback, don't be too bearish on other AI trends. The trend may be weak, but making money on weak trends may require a strategy.

It's not for nothing that this guy chose to take profits and roll today. A sharp pullback in European luxury goods stocks means the recession test is here, and the big rally in technology stocks may be over and it's time to fight the broader market.

I wonder how you evaluate the operation of this big order?