The New York Knicks pulled off the biggest comeback in NBA Finals history last night to go up 3-1 on the San Antonio Spurs. The Knicks, who haven’t won the NBA Championship since 1973, can wrap it up with a win in San Antonio on Saturday night.
I’m not a big basketball fan, but I was happy to see former Toronto Raptors O.G. Anunoby get the winning basket. I have no dog in this fight, but as a long-suffering Maple Leafs fan -- we haven’t won a Stanley Cup since 1967 -- I totally am rooting for the Knicks to end their 51-year drought.
Can’t Get Enough Options?: Join the list for Barchart’s daily unusual options report, delivered free.
On to the business at hand.
In yesterday’s unusual options activity -- options with at least 500 contracts of volume and expiring in seven days or more -- Microsoft’s (MSFT) Nov. 15 $580 call had the highest Vol/OI (volume-to-open-interest) ratio of the top 25 at 122.49, with Taseko Mines (TGB) in 15th spot at 19.49.
While Microsoft definitely caught my attention, CSX (CSX) and Charles Schwab (SCHW) also made the top 25 unusually active options yesterday.
All three set up nicely for Bull Call Spreads.
Microsoft (MSFT)
Although Microsoft led the pack in yesterday’s unusual options activity, the volume of 17,393 for the Nov. 20 $580 call represented just 2.9% of the 604,608 in volume on the day. Further, Microsoft’s daily volume was about one-third less than its 30-day average.
Nonetheless, the $580 call, combined with the Nov. 20 $480 call, sets up nicely for a Bull Call Spread.
The bull call spread is a bullish bet that the share price will increase by Nov. 20, preferably t0 $580 or higher, at which point you’d generate a maximum profit of $89.40 [$580 strike price - $480 strike price - $10.60 net debit], an 843.4% return, or 1,888.6% annualized.
The bull call spread is a defined risk/reward proposition. In this instance, it involves buying the $480 call option and selling the $580 call option, resulting in a net debit of $10.60 [$14.45 ask price for $480 strike - $3.85 bid price for $580 strike]. That’s the most you can lose.
Two things make the $480/$580 combination attractive: First, the maximum loss is just 2.7% of Microsoft’s closing price yesterday. Anything below 5% is a reasonable outlay. Secondly, the risk/reward is 0.12, which means for every dollar of potential profit, you only have to risk 12 cents.
Now, every bullish bet one makes should be supported by a bullish thesis. In Microsoft’s case, the most obvious answer to that is that MSFT has severely underperformed five of the seven Mag 7 tech stocks over the past year.
Although there are concerns about Microsoft’s AI competitiveness and possible slowing growth in its Azure cloud business, these issues don’t seem to bother Bill Ackman, whose Pershing Square hedge fund now owns 5.65 million Microsoft shares, accounting for 14% of its total portfolio.
Analysts like it too. Of the 49 covering it, 44 rate it a Buy (4.73 out of 5), with a target price of $554.28, well above its current price.
With Q4 2026 and Q1 2027 earnings to be released before the Nov. 20 expiration, Microsoft has an opportunity to positively surprise investors and deliver a move higher than the 15.84% expected.
CSX (CSX)
The Virginia-based railroad operator hit an all-time high of $47.55 on Tuesday. Railroad stocks are having a moment due to Union Pacific’s (UNP) pending cash-and-stock acquisition of Norfolk Southern (NSC) for $85 billion, including the assumption of debt. Industry consolidation is now on the table.
CSX had two unusually active call options yesterday. The June 18 $50 call above, which was in the top 25, and the June 18 $48.50 call with a Vol/OI ratio of 9.88. The two calls had a combined volume of 81,988, accounting for 97.2% of CSX’s options volume on the day, and 3.9 times its 30-day average.
As you can see above, a big institution bought 40,000 $48.50 calls at $0.30 and sold 40,000 $50 calls at $0.10 for a net debit of $0.20, or 0.4% of CSX’s $47.16 share price at the time of yesterday’s trade.
With only eight days to expiration, the share price will have to increase by 3.3% to $48.70 to break even [$48.50 long call strike price + $0.20 net debit] on the bet. That might not seem like a lot, but given the expected move is just 1.37%, it will need some sort of catalyst to move the share price enough to make money.
Why would somebody make this bet?
The maximum profit of $1.30 [$50 call strike - $48.50 call strike - $0.20 net debt] is a return of 650.0%, or 29,656% annualized, with a risk/reward ratio of just 0.15 to 1.
While the probability of CSX’s share price being above the breakeven of $48.70 a week on Friday is only 27% or so, the payoff is astronomical.
The only catalyst I can identify is that an offer for CSX will become public next week.
Charles Schwab (SCHW)
Charles Schwab had four unusually active call options yesterday. However, the two in the top 25 that expire in 191 days are the focus here. As with CSX, 99% of the volume of the two calls was executed in a single trade.
Here’s how the $105/$125 combination looks as I write this mid-morning on Thursday. The net debit is the same at $2,40, while the maximum profit is 733.33%, or 1,408% annualized, with a risk/reward of 0.14 to 1.
Schwab’s stock lost more than 8% on Tuesday after Altruist, a wealth platform designed for independent financial advisors, launched an AI-powered tax planning tool on its Hazel platform.
SCHW hit a 52-week low of $83.96 at the end of May. Its shares are down more than 10% in 2026. Altruist’s tax planning tool could be the best thing since sliced bread, but I can tell an overreaction when I see one. Unsurprisingly, its shares have recovered those losses over the two days of trading since.
With Schwab’s return on equity higher today than at any time since 2008 and a P/E ratio of 21.02x, lower than every period over the past decade except for the second half of 2023, it’s a value play that the institution that made this bet felt was worth taking the long odds.
On the date of publication, Will Ashworth 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.
More news from Barchart
Unusual Options Activity Points to Bullish Bets on MSFT, CSX, and SCHW Bearish Setups Alert: June 11th Bear Put Spread Scan Results Investors Buy Long-Dated Microsoft Call Options in Huge Volumes - A Very Bullish Signal 2 Covered Call Ideas on Bank of America for Reliable Income