It is Wednesday but we will not be looking at a mid-week contrarian trade as we did throughout 2014. In time, we will start another round of midweek contrarian trades but for now, we will ride the optimistic train as we enter 2015 with hopes of making profitable option trades.
In today’s piece, we will start with an exploration of the options of Microsoft Corporation (NASDAQ:MSFT). We have had much coverage of MSFT options in 2014 but we wouldn’t be going over those now because we are starting the New Year with fresh trades.
Microsoft is practically the grandfather of all tech stocks as it one of the few tech stocks that rose to prominence in the 1990s that is still a force to reckon with in today’s dynamic tech world. Microsoft with its market capitalization of $377.11B is engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers.
Why I am I excited about Microsoft in 2015
The chart above shows how the shares of Microsoft have traded in the last one year. You will observe the impressive appreciation that led the stock to record a 26% increase in 2014. In 2013, the stock soared more than 35% and the recent events surrounding the stock suggest that 2015 is set to be another highly profitable year.
From the chart above, you will observe that the stock has been obstinately bullish as shown by the green line. You will also observe that the stock had pullback a bit in the last two months; yet, the stock has obtained a $45 support in the same period.
If shares of Microsoft should break down below the $45 support, the stock could drop to $42, which is just slightly below the stock’s 200-day moving average. The stock has already gained 0.24% to $45.76 as at 10:27AM EST; hence, Microsoft seems to the starting 2015 on a profitable note. In addition, the stock’s RSI of 39.23 suggests that the pullback is ending as the stock appears to be nearing “oversold” level.
Why 2015 is Set to be Profitable for Microsoft
The main reason I am optimistic about the prospects of Microsoft in 2015 is the release of the Windows 10. The Windows operating system is an iconic brand with which it dominated the tech landscape in the 1990s. Microsoft is set to challenge for top spot again with the Windows operating system, with the release of the Windows 10 whose consumer preview slated for January 21.
The Windows Operating system accounts for about 28% of revenue that Microsoft generates but the company has been losing market share to Google’s Android (to a lesser degree Chrome) and Apple’s iOS. The main reason behind the loss in market share for Windows operating system is that Microsoft often charges a fee for the operating system whereas both Apple’s iOS and Google’s Android are available free of charge
Interestingly, Microsoft is set to release the basic version of Windows 10 free of charge and future upgrades will be available freely. However, the use of additional features will be provided at a monthly or annual subscription fee. Hence, we can expect that the free business model will draw in more clients in order to reestablish Microsoft’s dominance in the operating system’s space.
How to Trade MSFT Options
I am optimistic about the prospects of Microsoft Corporation in 2015 and I strongly believe that the stock has the capability to soar back to its recent highs. I have a $50 price on the stock in the next six months and I won’t be surprised if the stock sets a new 52-week high within this period. I recommend buying the MSFT Jul 2015 50.000 call (MSFT150717C00050000) at an asking price $1.10 or better.
— Daily Option Alerts