원문 보기
Jamal, let's talk Microsoft here on Signal Versus the Noise today. They have their earnings coming up next Tuesday. It's April 29th and it's probably one of the more interesting reports coming up because Microsoft sits at this intersection of cloud computing, of AI, and software, which has been beaten down in recent months.
I think we're going to look to this to see if the AI trade still has legs, but more importantly, if folks are changing their tune on software. Shares are trading around 419 right now. That puts the stock down around 24% from its all-time high. Set in July 2025 and down around 13% year-to-date so far.
Um it is recovering about 21, 22% off of those March lows. So it's been a bounce, but the technical damage hasn't been fully repaired. What's happened in the past 24 hours perhaps has added even more intrigue. Microsoft announced voluntary buyouts for about 7% of its workforce and we learned over the course of the session that Michael Burry was disclosing a long position in the stock.
Yes, Michael Burry of Big Short fame. Um at the same time though, while we're here, options activity on the tape has lit up in an unusual way. More than $10 million in puts were bought at the ask with both positions expiring after earnings. Jamal, break down this trade for us. Yeah, I'll get the obvious out of the way.
Look, Chris, this is noise uh in that I mean, this is not a trade that signifies that some that that Microsoft is going down or this is not some some conspicuous trade that you're looking at and like, "Oh, what's going on here?" I mean, this is likely noise. This is likely somebody who is maybe even hedging or maybe they're picking a their their their chance to uh get short Microsoft, if you will, short deltas in that they expect it to fall and understandably so.
You mentioned what's going on with the software stocks, but taking a look at these two trades, two different terms, and they were executed around the same time. Uh first you have the the smaller of the two, the Microsoft 415 puts in the May 22nd cycle. Like you mentioned, earnings are next week. So this is not an earnings trade per se.
It's just maybe someone trying to hedge a little bit uh into earnings or maybe they are taking a outright short Delta position in an a month that doesn't necessarily contain earnings. So again, they're buying these. They probably don't want to pay up for that implied volatility that's in the actual earning cycle.
Um so this one the big trade we see here is about 996. And the cool thing we like to do here on Signal vs. Noise is look at execution, right? And as you can see, usually we'll see if it's a facilitation trade done with banks trading desks versus sort of the um the prop firms against that trade who are taking the other side.
Usually that'll signi- be signified by a floor. This was basically done on the screens, meaning they just executed it. They went and paid 1710 as you can see was the offer here. And you could see stock was trading for 1562 at the time. And it was a little bit higher than that prior to the trade. It was 41681.
So obviously as the stock went down, this put market went up and that's why we got to the offer of 1710 versus a 1670 offer that was there a little bit ago. And you can see they paid 1710 for these, paid the offer 996, and immediately that 1710 went bid. So that's how you know they were bidding for these.
So that's the one trade, right? The next trade we saw was in the Ford the 410 puts in the May 29 expiration. So a little bit further out. This was a much bigger trade. They traded at 1510, a little closer to the ask. And this is a little bit of a wider market, but it tells you just how liquid Microsoft is that they can get filled on 5,722 of these.
So this is about 8 million. And as you said, in total this is 10,000 contracts. So again, these are these are big trades, but they're not massive when you you think about Microsoft, which is really a really big name and has tons of option volume throughout the day. Uh but nonetheless, these are very interesting and we just saw on the same day of this execution that uh ServiceNow and IBM had earnings.
Pretty much the whole software sector was dragged down. Microsoft was dragged down yesterday as well uh along with uh Salesforce CRM and and just that whole entire space was moving to the downside after the IBM and ServiceNow earnings. And I think somebody's just trying to uh make sure that they either don't get hit with their long stock and so they're trying to get some uh long puts in here or they're just trying to outright bet on maybe Microsoft is going to follow earnings as well.
Yeah, I mean, I'm I'm thinking about the size, the [clears throat] expirations, uh the fact that this is executed at ask. It maybe it's a hedge, but it does feel like someone's trying to just take a downside swing here. You know, the way that Microsoft's reacted around the earnings recently perhaps is worth reviewing going into next week.
Um April 25th, the stock rallied around 7 to 9% as they probably beat on other metrics. In July 25th, they had another strong quarter. EPS was up 24% year-over-year. Shares were up around 9% after those earnings into an all-time high. But when you get into October, while they beat again, the market starts focusing more on their 2026 uh fiscal CapEx number and not much of the what have you done recently, but how much is this all going to cost?
I feel like that tone has changed this earning season where, you know, the companies that are saying that they're building out for the demand that's been arriving, um they've been rewarded. And those companies that have not really been committed to growing their demand, uh growing their services, they've they've been punished.
I'm thinking about IBM and their refusal to release their AI book of business for the first quarter. Uh what's the backdrop here, Jamal, from your lens with Microsoft? Is it more of the AI story or are you thinking about Microsoft more along the software side of the business where, you know, in fairness, it looks like more of those software names than anything related to semis right now?
Yeah, I mean, it's almost a combined story, right? Like a lot of people have been talking about how AI has been eating software's lunch and that's what we've seen. I mean, from this drawdown at the end of January all the way down basically through a lot of the conflict that we dealt with. As a matter of fact, software stocks were some of the first that were bought up during the downtrodden days in the market and we saw that with Microsoft more recently.
I look, I see a name like this that's really big and it's a mag seven name and a lot of those have carried the market and I see opportunity. I see a situation to get long and that's what I've done. So, I had super bear super excuse me, super bull trades and that I was short put spreads to finance buying a long call spread.
After this move that we experienced here, I actually closed out my short put spread because it was more of a risk to the downside. At that point, it was only worth maybe a buck 50 and so I closed that and now I'm just on a call spread. I'm on the 425 450 call spread heading into earnings. I typically don't hold things like this but I am going to and I'm in the regular May cycle which again is a little bit it's going to be affected by earnings but it doesn't have the earnings premium.
So, that's why I like having that trade on. Jamal, do you make anything of the Burry angle? I know that we're we're paying more attention to the actual activity on the options tape but yesterday he disclosed longs in Microsoft and other beaten down software names like Adobe, Autodesk, PayPal, Salesforce.
Is there more signal to someone like that or is this all just noise right now? It's a lot of noise but I will tell you in in general I don't really pay attention to people like Michael Burry who are making big positions. Unless they're doing it in the same direction as me and so in this case I actually like the idea.
I mean, look, like I said this is a massive name that's down and the whole sector is down. I find there's a lot of opportunity there. I totally understand why he's doing it. Well said Jamal. Microsoft reports next week April 29th. We've had some big moves on the options tape. What do you think? Is this signal versus noise?
Let us know in the comments below and you've been watching signal versus noise. Like and subscribe for more videos. Thanks for watching Tasty Life.
Comments 0