Options traders piled into Alphabet and Microsoft calls on Wednesday, with volume in both names running more than 50% above their 30-day average. Neither stock has set a new high since at least May, but the positioning points to bets on a breakout as the Nasdaq sits less than 1% off last week's record.
The Nasdaq trades less than 1% off the all-time highs it set last week. Options traders placed some of the day's biggest bets on two stocks that haven't made new highs since at least May: Alphabet and Microsoft. Options volume in both names ran more than 50% above the 30-day average on Wednesday, as equities firmed after morning economic data came in better than expected, including a softer inflation print.
Alphabet's call buying turns one-sided
Even as bond prices rolled over in the afternoon, Alphabet held onto a 2.7% advance, and Microsoft added 1.8%. Trading in Alphabet was particularly bullish and one-sided, according to options flow data compiled across Cboe LiveVol, SpotGamma and Barchart: total call volume ran more than double put trading, with just shy of 150,000 calls likely initiated by buyers, compared with fewer than 100,000 calls sold and 50,000 puts bought.
Among the top 20 transactions by dollar amount, 14 were bullish, four neutral and two bearish in Alphabet, an unusually slanted stance even for a "Magnificent Seven" stock. More than $260 million in premium traded by midday Wednesday, with more than $200 million tied to calls. The biggest purchase was for in-the-money 250-strike calls expiring next June. Additional heavy buying came in the 370-strike call expiring Nov. 20 and the 350-strike call near the money expiring Friday. Those 370-strike calls trade for $11.40 each and need a 9% rally to pay off.
Microsoft traders build a bullish spread
In Microsoft, traders likely bought more than 130,000 calls, compared with fewer than 52,000 puts, while selling about as many calls. Still, the net delta exposure in the stock suggests traders today prefer Microsoft shares to rise. Almost $500 million in Microsoft options traded, with $400 million in premium tied to calls, $220 million of which was likely purchased.
Most of that buying sat in deep in-the-money calls, but one speculative trade stood out. In the Dec. 18 expiry, someone spent $12 million buying 3,000 in-the-money 500-strike calls, lowering the cost by selling about $2 million of 600-strike calls expiring the same day. The resulting bullish spread breaks even near $530, about 2.3% higher in Microsoft — a level that would mark a new closing high for the stock.
Source: US Top News and Analysis
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