Microsoft experienced a substantial market downturn following its post-earnings report, resulting in a 12% decline during Thursday’s session. This sell-off erased $400 billion in market capitalisation, marking it as the second-largest single-day market cap loss in US stock history. Concerns were raised over Microsoft’s rising capital expenditures, projected to increase by two-thirds in 2026 for data centre expansions.<\/p>\n
The NASDAQ 100 index responded, falling over 1%, with the broader NASDAQ Composite losing 1.6%. The S&P 500 and Dow Jones dipped by 0.6% and 0.2%, respectively. Bitcoin also saw a decline, dropping over 6% to $83,600. Despite impressive financial results, with an adjusted EPS of $4.14 and revenue surpassing estimates, analyst concerns persisted.<\/p>\n
OpenAI’s funding uncertainties further weighed on Microsoft’s outlook, as nearly half of its Remaining Performance Obligations are tied to the company. This relationship has caused apprehension, even as talks of a $60 billion investment by Microsoft, Amazon, and Nvidia into OpenAI continue. Software stocks like ServiceNow, HubSpot, and SAP also faced a sell-off, reflecting broader market apprehension.<\/p>\n
The dramatic sell-off in Microsoft has injected a significant amount of fear and volatility back into the market. Implied volatility for Nasdaq 100 options, measured by the VXN index, jumped over 25% yesterday, hitting its highest level since the uncertainty we saw back in October 2025. This sharp increase in expected price swings creates new opportunities for options traders.<\/p>\n
For those anticipating more downside, the technical picture points toward the stock filling its chart gap from May 2025, targeting a price near $396. A straightforward bearish position would be buying February or March put options to capitalize on this potential move. This strategy provides defined risk while offering exposure to further declines driven by capex concerns.<\/p>\n
Consumer Price Index Impact<\/p>\n
This market nervousness is not happening in a vacuum, as last week’s Consumer Price Index report showed inflation at 3.2%, a bit hotter than consensus estimates. This has reminded everyone that the Federal Reserve may not be quick to lower interest rates. We saw evidence of this concern in the options market, where put volume on Microsoft yesterday exceeded 2.5 million contracts, a 500% increase over its recent daily average.<\/p>\n
On the other hand, the stock\u2019s Relative Strength Index is now at 31, signaling it is approaching technically oversold conditions. Traders who believe this is a classic overreaction could consider selling cash-secured puts with a strike price below $390. This strategy allows you to collect premium, and it profits if the stock stabilizes or rebounds from here.<\/p>\n
We have seen this script play out before, like when Meta Platforms plunged in early 2022 over fears related to its heavy metaverse spending. While that marked a long-term buying opportunity, the stock remained under pressure for many months before recovering. The pain from Microsoft’s drop is already spreading to other software firms, suggesting investors are broadly questioning high-growth tech valuations.<\/p>\n
Given the uncertainty, traders who expect continued large price swings but are unsure of the direction could look at volatility plays. A long straddle, which involves buying both a call and a put option with the same strike price and expiration, could be effective. This position profits if the stock makes another big move, either up or down, that is larger than the total premium paid.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Microsoft lost $400 billion in market value after earnings, amid capex concerns and OpenAI funding risks.<\/p>\n","protected":false},"author":62,"featured_media":16989,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-40459","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/40459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=40459"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/40459\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16989"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=40459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=40459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=40459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}