MSFT Options Signal Bullish Bias Amid AI Expansion—Here’s How to Play the $480–$520 Range

• Microsoft’s Q1 FY2026 earnings beat and $77.7B revenue highlight Azure’s 40% growth, with AI services driving 18% of that surge.
• Options data shows heavy call open interest at $500 and $520 strikes, while block trades in puts suggest hedging ahead of next week’s expiry.
• Jim Cramer’s bullish take and the Osmos acquisition align with long-term AI-driven optimism, but short-term technicals hint at volatility.

Here’s the core insight: MSFT is caught between a bullish AI narrative and short-term bearish technicals, with options data pointing to a high-probability range trade. The stock’s current price near $478.56 sits just below its 200-day moving average ($479.80) and within a tight support zone. While the RSI (52.17) and MACD (-2.97) suggest equilibrium, the options market tells a different story—call open interest dominates, and block trades hint at institutional caution. Let’s break it down.

What the Options Chain Reveals About Market Sentiment

The options market is a tug-of-war between bulls and bears. For this Friday’s expiry, calls at $490 and $500 have the highest open interest (6,485 and 8,012 contracts), while puts at $450 lead with 4,652 contracts. For next Friday’s expiry, the imbalance widens: calls at $520 (33,679 OI) and puts at $450 (19,138 OI) dominate. The put/call ratio of 0.69 (calls > puts) suggests a net bullish bias, but don’t ignore the block trades.

Big money is hedging with puts—four major block trades in the $510–$525 put range (e.g., MSFT20260116P515, MSFT20260116P520) moved over 20,000 contracts worth $78M. This could signal institutional players protecting long positions or short-term bears capitalizing on volatility. The key takeaway? MSFT is likely to test $478.22 (support) and $485 (resistance) before next Friday, with options activity pricing in a potential breakout above $500.News Flow: AI Expansion vs. Short-Term Execution Risks

Microsoft’s recent headlines are a mixed bag. The Osmos acquisition and Azure’s 40% growth reinforce its AI-first strategy, while Q1 earnings showed 17% Office 365 growth and 150M Copilot users. Jim Cramer’s bullish take and $630 analyst price target add to the optimism.

But here’s the catch: technical indicators and options data suggest near-term volatility. The stock’s 30-day support/resistance ($478.22–$478.60) is razor-thin, and the 200-day MA at $479.80 could act as a psychological barrier. If Microsoft’s price action breaks below $472.20 (intraday low), it could trigger a retest of the $460–$450 put-heavy zone. Conversely, a close above $485 might attract short-covering and call buyers.

Actionable Trade Ideas: Calls, Puts, and Precision Entries

For options traders, the most compelling setup is a bull call spread using the $490 and $500 strikes. Buy MSFT20260116C490 (next Friday expiry) at a discount and sell MSFT20260116C500 to cap risk. This works if MSFT holds above $478.22 and breaks $485. For bears, the MSFT20260116P450 put offers downside protection if the stock dips below $472.20—ideal for hedging long positions.

Stock traders should focus on two levels:

• Entry near $478.22 (support) with a stop below $472.20. Target $485–$490 if the 30D MA at $482.85 holds.
• Short-term scalp opportunities exist if MSFT rallies above $479.26 (intraday high) and tests $480.60 (middle Bollinger Band).

Volatility on the Horizon: Balancing Bullish Fundamentals and Bearish Hedging

Microsoft’s AI-driven growth story is intact, but the options market is pricing in near-term uncertainty. The block trades and put-heavy OI suggest smart money is preparing for a potential pullback, even as fundamentals point higher. The next 72 hours will be critical—watch volume at $478.22 and $485. If the stock holds above $478.22, the $500 call strikes could become a hotspot. If it breaks below $472.20, the $450–$460 put zone will dominate. Either way, the $480–$520 range is where the action lives.