Wednesday, December 7, 2011

MSFT: The Road Ahead

MSFT Road Map
 I heard Tom Sosnof of, a trader/entrepeneur I admire greatly, put on a bullish diagonal trade for Microsoft today. I believe his trade was -Jan25Put/+Feb24Put for a 30 cent or so credit. When I looked at the seasonality of MSFT I saw that Tom's trade was dubious. Since I need more negative delta in my portfolio anyway I felt compelled to compose and take a Bearish diagonal on MSFT, which I have shared on MyTrade. I bought the -Dec 25 Call/+Mar 26 Call diagonal for a debit of 34 cents. My max loss is $1.34 if MSFT bucks its season and explodes to the upside in the next week and half, otherwise a strong seasonality takes over in MSFT in the first quarter that I think will take MSFT down to the neighborhood of its current 52 week low of $23.65 by March. MSFT has a better than even chance, seasonally speaking, of going even lower but I have given Tom a benefit of a doubt by picking a higher probability target north of $23.65.  MSFT has weekly options which I will avail myself of if they make sense when the time comes to roll next Thursday. I may be a little early since the Aroon indicator has not got to the overbought area but I am willing to suffer through a little end-of-year bullishness.

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