MSFT Options Signal $520 Bullish Breakout as Block Traders Target $495–$500 Puts: Here’s How to Play It

• MSFT trades at $456.89, down 0.54% from open, with RSI at 24.6 (oversold territory)
• Options OI shows 68.6% call dominance, with $520 call OI (33,925) vs. $450 put OI (20,394)
• Block trades of 5,400 and 4,350 puts at $495–$500 suggest bearish positioning ahead of Friday

Here’s the takeaway: MSFT is caught in a tight range between its 200D MA ($481.46) and Bollinger Bands ($465.28–$494.77). While technicals hint at a potential rebound, options data reveals a tug-of-war between bulls eyeing a $520 breakout and bears hedging at $495–$500. The key question: Will Azure AI momentum override near-term bearish bets?

Bullish Call OI vs. Bearish Block Trades: A Clash at Key Levels

The options market is split. Call open interest peaks at $520 (33,925 contracts), a 12% premium over current price, while puts dominate at $450 (20,394). This suggests two camps:

• Bulls are betting on a rebound to test the 30D support/resistance zone ($487.45–$488.10) and potentially break out to $520.
• Bears are hedging with block trades at $495 (MSFT20260116P495) and $500 (MSFT20260116P500), which could trigger a short-term selloff if the stock dips below $480.

The MACD (-4.78) and RSI (24.6) both scream oversold, but the 100D MA ($500.48) looms as a psychological hurdle. If MSFT closes above $488.10 today, the $520 call OI could act as a self-fulfilling prophecy.

News Flow: AI Growth vs. Valuation Concerns

Microsoft’s recent headlines are a mixed bag. The $17.5B India AI investment and Q2 earnings on Jan 28 are bullish catalysts, but the stock’s 8% drop over three months reflects skepticism about AI monetization. Analysts are split:

• Bull case: Azure’s 40% growth and Copilot’s 90% Fortune 500 adoption could drive a $630 price target (KeyBanc).
• Bear case: A 34.1 P/E ratio and regulatory risks (e.g., AI margin pressures) keep the stock from breaking out.

The block trades at $495–$500 suggest institutional players are hedging against a post-earnings selloff, but the $520 call OI implies retail and institutional bulls are pricing in a $600+ move if Azure AI delivers.

Actionable Trade Ideas: Calls for Breakouts, Puts for Hedging

Here’s how to play the setup:

1. Bullish Call Spread (Jan 23 Expiry): Buy MSFT20260123C500 (strike at $500, 9% OTM) and sell MSFT20260123C525 (strike at $525). If MSFT rebounds to $488.10 by Friday, this spread could capitalize on a $520+ breakout.
2. Bearish Put Hedge (Jan 16 Expiry): Buy MSFT20260116P450 (strike at $450, 1.3% OTM) to protect against a drop below $465.28 (lower Bollinger Band).
3. Stock Entry: Consider buying MSFT near $465.28 (lower Bollinger Band) if it holds. Target $488.10 (30D support) as a first exit, with a stop-loss at $450.

Volatility on the Horizon: Earnings and AI Catalysts

The next two weeks will be pivotal. Microsoft’s Q2 earnings on Jan 28 could either validate the $520 call OI or trigger a selloff if Azure AI growth falls short. Meanwhile, the $17.5B India investment and Copilot’s enterprise adoption are long-term tailwinds.

For now, the market is pricing in a 68.6% call dominance, but the block trades at $495–$500 suggest caution. If MSFT closes above $488.10 today, the $520 call OI could become a powerful catalyst. But if it breaks below $465.28, the puts at $450 will likely dominate. Either way, the coming week offers clear entry points for both bulls and bears.