MSFT Options Signal Bullish Bias at $520 Strike: Here’s How to Play the AI Infrastructure Rebound

• Microsoft (MSFT) trades at $461.44, down 1.96% from its previous close of $470.67, with intraday lows near $460.73.
• Options open interest shows heavy call buying at $520 and $700 strikes (this Friday’s expiration), while puts dominate at $450.
• Technicals point to a short-term bearish trend (RSI at 34.09, MACD bearish crossover), but long-term averages (200D at $481.06) suggest potential support.

The Core Insight: Despite today’s selloff, MSFT’s options market is pricing in a strong bullish bias above $520—driven by AI infrastructure optimism and strategic call-heavy positioning. The stock shows upside potential if it breaks above $480, but downside risks linger near $460.The Call-Heavy Options Setup and What It Reveals

Let’s start with the numbers: this Friday’s options chain has 33,938 open contracts at the $520 call strike, nearly double the next highest at $700 (25,714). That’s not noise—it’s a signal. Traders are betting MSFT could rally 13% from current levels by expiration. Meanwhile, puts at $450 (20,945 OI) hint at cautious downside protection. The put/call ratio of 0.69 for open interest (more calls than puts) reinforces a net bullish stance, even as the stock trades below its 30D moving average ($481.93).

But here’s the catch: the RSI at 34 and MACD histogram (-0.35) suggest overbought exhaustion in the short term. If MSFT fails to hold above $469.36 (lower Bollinger Band), the selloff could accelerate. No major block trades today, so no whale-driven moves to worry about—yet.

How Microsoft’s AI News Shapes the Narrative

The recent headlines are a mixed bag. On one hand, rising AI infrastructure costs and OpenAI’s uncertain long-term returns have pressured the stock. On the other, Microsoft’s $500M annual investment with Anthropic and its Q1 2026 $77.7B revenue beat show resilience. The new community impact initiative might ease regulatory headwinds, too. Think of it like this: investors are pricing in near-term pain but betting on long-term AI dominance. The options market? It’s buying the future.

Actionable Trade Ideas for MSFT

For options traders: Buy-to-open the MSFT20260116C520 (this Friday’s $520 call) if MSFT breaks above $480. Why? The $520 strike is a psychological hurdle where heavy open interest could create a self-fulfilling rally. For a longer-term play, the MSFT20260123C500 (next Friday’s $500 call) offers cheaper premium if the stock consolidates near $460–$470.

For stock traders: Consider entries near $460.73 (intraday low) with a stop below $455. Target $480–$485 first, then $500 if the AI narrative gains steam. Avoid buying above $475 until the 30D MA ($478.36) holds.

Volatility on the Horizon

MSFT’s path hinges on two things: 1) Can it rebound above $480 to trigger the call-heavy positioning? 2) Will AI infrastructure costs stabilize, or keep weighing on short-term earnings? The options market is pricing for the former, but reality could swing either way. Keep an eye on the 200D MA ($481.06) as a key inflection point. If Microsoft’s AI bets pay off, this dip could be a golden entry. If not… well, the puts at $450 are there for a reason.