MSFT Bullish Calendar Call Spread with 210% Upside

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This MSFT Calendar Call Spread Targets 210% Return

Bullish play with a target stock price of $395

Strategy has +210% upside potential and 14% undervalued

Strategy: MSFT Calendar Call Spread
Sell 22-Dec-23 395 Call2.40
Buy 19-Jan-24 395 Call5.85

Microsoft has seen its price gain +0.6% today to $379.56. The shares have been in a steady uptrend since October 25, based on MSFT moving averages. Setting up this calendar spread with strikes at $395 gives you a bullish bias to tap into MSFT stock's strength.

Option Profit Calculator Results for MSFT Calendar Spread at 22-Dec-23 Expiration

In this scenario, the optimal stock price for the option strategy would be $395.00 on the date of the first expiration, December 22, 2023. This is equal to the strike price of the options in the spread. Since MSFT is in a technical uptrend currently, and the strikes are above the current stock price of $379.71, the spread is taking advantage of the stock's upward momentum. If the stock price is $395.00 at expiration, we can benefit from the 22-Dec-23 call, which we sold, expiring worthless, and the option that we are long, the 19-Jan-24 call, will still have time premium built in.

Since we do now know what the exact implied volatility will be on December 22, we can use our historical data to make an educated estimate to help us calculate the value of the 19-Jan-24 option. Applying the median historical implied volatility of 24.4 from similar options, the theoretical value of the call is 10.71 at the date of the 22-Dec-23 expiration. Using the above assumptions gives us a potential upside of +210% for this calendar spread.

MSFT Calendar Spread Value vs. Market Price

According to Market Chameleon estimated value, MSFT Calendar Spread is trading at a 14% discount to historical benchmark.

If we use historical data to measure how similar spreads in MSFT were priced in the market, the 4-year average price was 3.99, with a high mark of 5.74 and a low of 2.88.

Currently, the calendar call spread is bid at 3.30 and offered at 3.45. The midpoint of the spread is 3.37.

If we use 3.99 as our historical fair value benchmark, the current market ask price is at a 14% discount, while the current market midpoint represents a 16% discount.

Current PriceHistorical Values of Similar Spreads
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.


The MSFT calendar call spread we've identified here can be a good way to play a bullish outlook because the option strategy has a +210% upside potential, is 14% underpriced relative to historical measures, and will benefit if the stock continues to trend higher to $395.

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