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Option Brief: Yesterday, Microsoft Corporation (NASDAQ:MSFT) submitted its purchase of Nokia Corporation's (ADR) (NYSE:NOK) cellphone division to the European Commission -- which reviews large mergers and acquisitions -- and a decision on its legality is expected by Wednesday, Dec. 4. Elsewhere, in the options pits, traders swarmed MSFT's April 2014 37-strike call, which saw nearly 36,000 contracts cross the tape during the session, including a block of 28,700.
The majority of the contracts at that strike changed hands at or near the ask price, suggesting they were purchased. What's more, open interest gained roughly 28,000 contracts overnight, pointing specifically to buy-to-open activity. By initiating long call positions, the traders are expecting that MSFT -- currently perched at $35.49 -- will advance past $37 by options expiration next April. If the stock falters short of that level, the most these individuals have at stake is their original cash outlay.
Although the gain required to bring MSFT into the money is a modest 4.3%, the shares haven't explored that territory since November 2007. Currently, the options market is pricing in a roughly 2-in-5 chance of the software name sitting north of $37 at expiration, based on the option's delta of 0.38, or 38%.
Finally, earlier this morning, the Supreme Court of Canada ruled against Microsoft Corporation (NASDAQ:MSFT), giving consumers the right to join a price-fixing class action lawsuit. The high court, however, rejected similar class-action attempts against Archer Daniels Midland Company (NYSE:ADM) and Cargill, Incorporated.