A bullish options trade on this ‘Mag 7’ stock if Nvidia earnings lift tech
After a week of bearish action, Federal Reserve Chair Jerome Powell’s Jackson Hole remarks were a welcome curveball. Most indexes ripped almost 2% on Friday on hints that a rate-cut cycle could kick off in September. Rate cuts are a tailwind for growth, and tech sits squarely in that lane. Most of the “Magnificent Seven” popped on Friday’s news, yet the market seems to have overlooked one of the giants: Microsoft — which sets up my trade idea for the week. On the nine-month daily chart, MSFT is stabilizing near its lower Bollinger Band, a range tool many traders use to spot “garden-variety” pullback bounces. In normal corrections, price often tags the lower band and then mean-reverts—exactly what I’m watching for here. The trade isn’t “on” yet, but it could firm up as soon as Wednesday when Nvidia reports. A strong NVDA print tends to lift the entire tech complex — MSFT included. For confirmation, I’m watching: RSI (Relative Strength Index): A versatile momentum gauge that flags overbought/oversold conditions and helps spot reversals (so you’re not buying into extremes). On MSFT, RSI is still trending down, so it’s a waiting game — look for it to curl higher before considering the entry. MACD (5,13,5): MACD is a classic reversal tool. I speed it up to (5,13,5) instead of the standard (12,26,9) to get earlier reads. The MACD line (blue) hasn’t crossed above the signal line (yellow) yet, but it’s close. A bullish crossover—or at least a rising histogram—would strengthen the reversal case this week. For my CNBC readers: I’m opening up my options trade scanner for free only for today—grab a few more trades like this while it’s live. Here’s the scanner . The trade setup: MSFT 500-505 Bull Call Spread To take a bullish shot on MSFT, I’m using a bull call spread — defined risk, defined payoff. With price here, the base setup is: buy the $500 call and sell the $505 call as one unit. If MSFT drifts a few bucks, I’ll adjust the strikes to bracket price (e.g., if MSFT is around $507 tomorrow, a $505–$510 spread works). The goal is to keep the stock trading inside the strikes so the risk/reward stays optimal. If MSFT expires at or above the short strike, the spread pays its full $5 value — turning a ~$2.50 debit into a 100% ROI. With 10 contracts, that’s $2,500 at risk for a potential $2,500 profit. Here is my exact trade setup based on current MSFT price of $503: Buy $500 call, Sep 19 expiry Sell $505 call, Sep 19 expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: https://tradingextremes.com , https://tradewithmaya.com Author: Mean Reversion Trading YouTube, Twitter: @TheMeanTrader DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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