MSFT Options Signal $400 Floor as Bears Target $365—Here’s How to Play the AI Uncertainty

• Microsoft’s stock slumps 2.1% to $404.49, breaking below its 30-day moving average of $454.32.
• Options market shows 0.527 put/call open interest ratio, with heavy call OI at $440–$520 and puts at $400–$362.5.
• A $415 put block trade (400 contracts) hints at institutional bearishness ahead of Feb 27 expiration.

Here’s the takeaway: Microsoft is testing critical support levels as options traders bet on a $400 floor and a potential $365 breakdown. The stock’s technicals and options flow suggest a high-probability range-bound battle, but AI-driven risks could force a sharp selloff. Let’s break it down.

Bullish Bears and the $400–$365 Options War

The options chain tells a story of divided sentiment. For this Friday’s expirations, put open interest peaks at $400 (9,419 contracts), while calls surge at $440 ($8,190) and $430 ($8,180). Next Friday’s data amplifies the tension: calls at $545 ($23,375) and $600 ($21,064) suggest speculative bullishness, but puts at $400 ($10,165) and $365 ($3,899) signal deep bearish conviction.

The block trade—MSFT20260227P415 (400 contracts bought)—adds weight to the $400–$365 bear case. Think of it like a whale buying insurance against a collapse. Combine this with Microsoft’s RSI at 39.8 (oversold territory) and Bollinger Bands squeezing the stock near the lower band ($386.69), and you’ve got a setup where a $400 close could trigger cascading puts. But if the stock holds above $412 (30-day support), bulls might rally.

News Flow: AI Woes vs. Cloud Gains

Analysts are torn. Melius downgraded MSFT to Hold, warning that AI spending could strain cash flow and lagging Copilot adoption risks growth. Yet Q4 earnings showed Azure revenue up 39% and a $4.14 EPS beat. The contradiction? Investors are punishing near-term risks but betting on long-term cloud dominance. Jim Cramer’s critique of Copilot’s 15M users as "insufficient" clashes with institutional buying (Massachusetts Financial Services added $15.7B in MSFT last quarter). This duality means the stock could gap lower on bad AI news but rebound on cloud resilience.

Trade Ideas: Play the Range or the Breakdown

For options:

• Sell calls at $440 (MSFT20260220C440) if MSFT holds above $412.43. The strike is a top OI level with 17,678 contracts, and a $404.49 price gives you 8.5% downside cushion.
• Buy puts at $400 (MSFT20260220P400) if the stock dips below $404.30. The $400 level has 10,165 contracts of OI, and a close under $395 could trigger more selling.

For stock:

• Entry near $412.43 (30-day support) with a stop below $404.30. Target $430–$440 if the 30D MA ($454.32) holds.
• Short above $416.09 (today’s open) with a tight stop at $412.43. Aim for $400–$385 if the $400 put wall gets tested.

Volatility on the Horizon

Microsoft’s future hinges on balancing AI bets and cloud profits. The options market is pricing in a 50/50 fight between $400 and $545, but the block trade and Melius downgrade tilt the odds toward a $365–$400 range. Your edge? Watch the $412.43 support. If it holds, the stock could rally to test $440 call walls. If it breaks, the $362.5 put OI becomes a gravity well. Either way, this is a stock where patience and precise level watching will pay off—just don’t let AI headlines blind you to the bigger picture.