Things are getting crazy out there. But this post isn’t going to be about all the deadwood companies whose stocks are getting short squeezed. I’m looking at some of the biggest names showing signs of breaking out and this is something investors should not ignore. We got into Google (Alphabet) recently, and this might be a double-down of sorts, but now we’re eyeing another mega cap.
Check out this breakout in Microsoft $MSFT today. Some might argue that this is “blow-off-top” action, but from my seat it looks like we’re just getting started an another significant leg higher:
Now, considering the mechanics of the markets are getting out of whack with all the nutty speculation happening in other corners of the market, my spidey-senses are tingling which is alerting me to be careful. The beautiful thing about using options to express a bullish bet here is I can fully define my downside risk. I can confidently enter the market knowing full well the most amount of money I can lose. There is power in this certainty.
So with that in mind and with earnings out of the way for the time being, I’m liking $MSFT here with a Bull Call Spread.
Here’s the Play:
I like a $MSFT September 250/300 Bull Call Spread for around $12.00. This means I’ll be long the 250 calls and short an equal amount of 300 calls for a net debit. And this $12.00 debit represents the most I can lose in this trade if it goes sideways or down.
If $MSFT closes below $222 per share at anytime during my hold, I’ll look to take the loss and exit the trade to prevent any further losses. Yes, my risks are defined, but I’d like to limit my losses if I have the opportunity to do so.
On the upside, we’ll look to close this spread for around $31. This would represent capturing at least 50% of the maximum available profit in this spread. The most it could be worth is $50 if held all the way to September expiration, but I don’t want to hold it that long if I can help it.
If you have any questions on this trade, please send them here.
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