Big tech has been leading the market for years, but even the strongest companies can experience sharp pullbacks. That’s exactly what happened with Microsoft (MSFT) recently.
Earlier this year, Microsoft was trading near $477 as enthusiasm around AI continued to push major tech stocks higher. But after earnings and renewed questions around AI spending, the stock slid to around $411 in just a few weeks.
For many investors, that move raised concerns. But for options traders, it created opportunity.
In a recent video, Barchart contributor Rick Orford breaks down how two bearish options strategies can benefit from that exact type of market correction.
Two Ways Traders Can Position for a Pullback
Rick demonstrates how traders could approach a potential stock correction like Microsoft’s using two different options strategies.
#1. Long Put Strategy
A long put involves buying a put option in anticipation that a stock’s price will fall below the strike price.
In the example from the video:
- Microsoft was trading near $477
- A $460 put option was purchased for $8.95 per share, or $895 per contract
- The trade had a relatively low probability of profit at the time — about 26%
But when Microsoft later dropped to roughly $411, the value of that put option surged and was now worth roughly $5,035 per contract.
That represents a gain of over $4,000 on a single contract.
#2. The Income Alternative: Bear Call Spread
Rick also demonstrates a second strategy that traders sometimes use when expecting a stock to stay below a certain level.
A bear call spread involves selling a call option and buying another call option at a higher strike. This caps both the potential risk and reward.
In the example from the video, a 500/515 bear call spread generated $345 in premium. In other words, as long as Microsoft stayed at or below $500 through expiration, the trader could keep most or all of that premium as their profit on the trade.
When Microsoft declined following earnings, the spread moved so far out of the money that its value dropped close to zero, and it even fell off our screener — meaning the trader could keep the premium.
What This Example Really Shows
The takeaway from the video isn’t that traders should always bet against Microsoft. Instead, it highlights how options strategies can be used to manage risk or profit from market moves when conditions change.
It also shows how probability of profit isn’t the only factor that matters. Sometimes lower-probability trades — like out-of-the-money long puts — can deliver large returns when the underlying stock moves sharply.
Rick walks through the complete example — including the Meta (META) trades used in the same experiment — in the full video.
Watch the Microsoft options trade breakdown:
- Stream the full strategy video from Rick Orford
- Try Barchart’s Options Screener to discover new opportunities by strategy
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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