MSFT Options Signal Bullish Bias at $500–$510: Here’s How to Play the AI Rebound

• Microsoft (MSFT) plunges 2.9% to $477.59, breaking below its 200D MA of $470.65.
• Options data shows call open interest dominates at $500–$510 strikes, while puts cluster near $475 support.
• Block trades hint at hedging activity, with a $300K put sale at the MSFT20251031P510 strike.

Here’s the takeaway: MSFT is testing critical support at $477.71, but options traders are betting on a rebound above $500. The stock’s 2.9% drop today aligns with bearish technicals, yet call options at key strikes suggest lingering conviction in Microsoft’s AI-driven recovery. Let’s break down what’s really happening.

Bullish Pressure at $500–$510, But Support Is Fractured

The options chain tells two stories. For this Friday’s expiration, call open interest peaks at $500 (OI: 8,029) and $510 (OI: 6,050), while puts cluster near $475 (OI: 5,109). This suggests traders expect a bounce from current levels but fear a deeper pullback. The next Friday’s data amplifies this: calls at $585 (OI: 26,562) and $575 (OI: 20,253) show long-term bullishness, while puts at $460 (OI: 9,642) highlight a secondary support zone.

Block trades add intrigue. A 200-lot sale of the MSFT20251031P510 put (expiring Oct 31) for $300K hints at hedging by large players. Meanwhile, a 600-lot sale of the MSFT20250926P490 put (Sept 26 expiry) for $93K suggests short-term bearish positioning. These moves signal caution—don’t assume the rally is a given.

AI Headlines: Growth Hurdles vs. Strategic Bet

Microsoft’s recent news is a mixed bag. The stock’s 2.76% 30-day drop reflects concerns about Copilot’s 2% adoption rate and Foundry’s slowed growth. Yet the company’s $17.5B AI investments in India and Canada underscore its long-term bet. Analysts are split: some see a $420 fair value, others argue the 34.9x P/E is reasonable for a cloud leader. The key question is whether the market will discount near-term AI struggles or reward long-term infrastructure bets.

Actionable Trade Ideas: Calls for Rebound, Puts for Safety

For options traders, consider these setups:

• Bullish Play: Buy the MSFT20251212C500 (this Friday’s $500 call) if MSFT closes above $479.11 (30D resistance). Target $505–$510 for a 5–10% move.
• Bearish Hedge: Buy the MSFT20251212P475 (this Friday’s $475 put) if price drops below $476.67 (intraday low). Target $465.37 (lower Bollinger Band) as a stop-loss.
• Long-Term Bet: Buy the MSFT20251219C585 (next Friday’s $585 call) if MSFT stabilizes above $485. This plays the "AI optimism" narrative.

For stock traders, consider:

• Entry Near $477.71 (30D support) with a tight stop below $476.67. Target $490.11 (middle Bollinger Band) as a first exit.
• Avoid Overexposure Below $465.37—the lower band and 200D MA confluence could trigger a larger selloff.

Volatility on the Horizon: Balancing AI Optimism and Near-Term Risks

The next 72 hours will test MSFT’s resolve. A close above $484.25 (today’s high) could reignite bullish momentum, while a break below $476.67 risks a test of $465.37. Options traders should monitor the $500–$510 call strikes for conviction—if those expire worthless, the bear case strengthens. For now, the stock sits at a crossroads: AI optimism vs. execution doubts. Your bet? The market’s call… but the options data leans bullish.