Microsoft (MSFT) stock was a bearish candidate that came up on one of my Barchart Stock Screeners that searches for stocks trading below their 50-day moving average and have a high IV Percentile.

Here are the full parameters for the screener and the results.

More News from Barchart

• 2 Mega-Cap Nasdaq Stocks with Unusual Options Activity: What to Watch

• Turn Omega Healthcare into an Income Machine with This Options Play

• McDonald's Stock Price Targets Are Higher - Shorting MCD Puts Works Here

• Our exclusive Barchart Brief newsletter is your FREE midday guide to what's moving stocks, sectors, and investor sentiment - delivered right when you need the info most. Subscribe today!

Today, we’re going to look at a Bear Call spread trade that assumes MSFT will struggle to get back above the 430 level in the next few weeks.

A Bear Call spread is a bearish trade that also can benefit from a drop in implied volatility.

The maximum profit for a Bear Call spread is limited to the premium received while the maximum potential loss is also capped. To calculate the maximum loss, take the difference in the strike prices of the long and short options, and subtract the premium received.

MSFT BEAR CALL SPREAD

To create a Bear Call spread, we sell an out-of-the-money call and then by another call further out-of-the-money.

Selling the April 17 call with a strike price of $430 and buying the $435 call would create a Bear Call spread.

This spread was trading for around $0.64 yesterday. That means a trader selling this spread would receive $64 in option premium and would have a maximum risk of $436.

That represents a 14.68% return on risk between now and April 17 if MSFT stock remains below $430.

If MSFT stock closes above $435 on the expiration date the trade loses the full $436.

The breakeven point for the Bear Call spread is $430.64 which is calculated as $430 plus the $0.64 option premium per contract.

COMPANY DETAILS

The Barchart Technical Opinion rating is a 100% Sell with a Strengthening short term outlook on maintaining the current direction.

Long term indicators fully support a continuation of the trend.

Microsoft Corporation is one of the largest broad-based technology providers in the world.

The company dominates the PC software market with more than 80% of the market share for operating systems.

The company's Microsoft 365 application suite is one of the most popular productivity software globally.

It is also now one of the two public cloud providers that can deliver a wide variety of infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) solutions at scale.