Microsoft Options See Highest Volatility In Years

Microsoft Corporation (MSFT) is expected to make a large move this week as implied volatility for the Mar 16, 2018 $65.00 call has reached some of the highest levels seen over the last seven years

Microsoft Corporation (MSFT) is expected to make a large move next month as implied volatility for the Mar 16, 2018 $65.00 call has reached some of the highest levels seen over the last seven years. Implied volatility is simply a quantitative measure of how much volatility, or price movement the market is expecting to see at a future point in time. Understanding Derivatives

Analysts expect more seasoned options traders will take full advantage of the implied volatility and use the expected movement in price to sell premium and capture returns by closing their positions as the market rises. With several of the more popular lagging indicators, such as the Investopedia Anxiety Index, hovering around 112 points, it is merely a matter of time before investors become uncomfortable in their own holdings and begin to sell.

Taking into account the recent market drop of 666 points in the Dow Jones Industrial Average on February 2nd of this year, implied volatility could reach an all-time high market wide as calls and puts come due the third week of February. Microsoft will be ripe for options traders who are not afraid to pull the trigger and construct condors or iron butterflies to capture returns regardless of market direction.

Although market volatility is only expected to increase as geopolitical tension and record high valuations continue to flood the market, traders who understand the warning signs of a correction are well positioned to make profits unseen since the collapse of the collateralized mortgage obligation (CMO) market in 2008. Even with heightened volatility levels being the norm post-election cycle, market sentiment remains bearish, and it is simply a matter of time before the market corrects. This is due in large to lofty valuations within several sectors of the market that are supported neither by earnings or a reduction in capital expenditures year over year.

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Name: J Crawford
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