Earlier in the week, JC & I were chatting online about some possible trade opportunities, and we had the following riff on Microsoft $MSFT:
JC: Hey, $MSFT long straddles.Sean: You in? or are you asking if it’s a good idea?JC: I think it’s tight. It either breaks out and rips, or just get absolutely destroyed.Sean: Yeah. Vol is a little higher than I’d prefer for that trade. But if you think a move is imminent soon, I don’t hate it.JC: I think it breaks out. But like $XLK in October, if it doesn’t it’s over. It’s either a “good buy” or a “goodbye.”Sean: A couple more days of sideways action might lower the vol a little more, which would make me happy 🙂
Fast forward to today and $MSFT volatility has come in a smidgen.
The fact is, $MSFT has been in a $10 range since early June. I’d share a chart with you, but you’d be bored as the range has tightened even more in recent weeks into basically an $8 dollar range. To me, especially in this tape, $MSFT is beginning to look like a coiled spring that can pop in either direction. It just needs a catalyst. That catalyst might be coming on October 23rd when it announces its next earnings report. Or it could be something external in the ongoing Tariffs nonsense or some other clown show move out of Washington.
At the end of the day, the reason won’t matter. But any breakout from this range is likely to be met with some significant range expansion. [Read more…]