Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Microsoft Corporation (MSFT) Traders Bet On a Round-Number Breakout

An upbeat fundamental development sent Microsoft Corporation soaring on Tuesday

by 3/19/2014 9:39 AM
Stocks quoted in this article:

Option Brief: Microsoft Corporation (NASDAQ:MSFT) rallied to the $39.90 level yesterday -- its highest mark since July 2000 -- after multiple sources said a version of Microsoft's Office software for Apple Inc.'s (NASDAQ:AAPL) iPad could be rolled out later this month. Against this positive price action, overall option volume jumped to nearly five times typical levels, and a number of short-term speculators targeted a quick breakout above the round-number $40 mark.

The most active strike on Tuesday was MSFT's March 40 call, where 34,868 contracts changed hands -- mostly at the ask price, suggesting buyer-driven activity. Open interest soared overnight, making it safe to assume that new bullish positions were initiated. Amid yesterday's upward momentum, delta for the call jumped to 0.30 (from Monday's close at 0.04), suggesting a 30% chance of an in-the-money finish at Friday's close, which is when the front-month options expire.

Meanwhile, the weekly 3/28 40-strike call also garnered its fair share of attention. More than 28,200 contracts crossed at this slightly further-dated call, including one large lot of 17,706. According to Trade-Alert, the block of calls was purchased for $0.32 apiece, implied volatility rose at the transaction, and open interest jumped overnight -- collectively pointing to buy-to-open activity. Should MSFT stay south of $40 through next Friday's close, the maximum loss is limited to the initial premium paid. For Tuesday's call buyer, this amounts to about $567,000 (17,706 contracts, times net debit, times 100 shares per contract).

As noted, Microsoft Corporation (NASDAQ:MSFT) put in a solid technical performance on Tuesday, and by the close, the stock was sitting 3.9% higher at $39.55. In addition to the well-received fundamental news, the equity received got clocked recently on a Monday to start the day. Overnight, Cowen and Company followed Barclays' lead, and raised its price target for MSFT to $40 from $39.


Featured Brokers
Unusual Option Volume
Option Flow
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2015 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email:

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by | Data delayed 15-20 minutes unless otherwise indicated.