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Microsoft Corporation (MSFT) Put Volume Hits Fever Pitch

MSFT options players have their pulse on a key technical level

by 4/15/2013 2:34 PM
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With earnings just around the corner, and a key technical level just overhead, Microsoft Corporation (NASDAQ:MSFT) option traders have grown increasingly skeptical. In fact, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the blue chip's 10-day put/call volume ratio of 0.91 stands just 1 percentage point from a 12-month peak. In simpler terms, option buyers have picked up MSFT puts over calls at a near annual-high clip during the past couple of weeks.

In the front-month series, the at-the-money April 29 put has been the proverbial belle of the ball, with more than 80,000 contracts opened during the past 10 sessions. This strike is now the clear-cut home to peak put open interest in the series, with more than 104,000 contracts outstanding. In fact, the April 29 strike is also the favorite among call traders, with more than 126,300 contracts in residence.

MSFT April open interest changes from 10 days ago

Perhaps the $29 region is closely watched by options traders because it has historical significance on the charts. As Schaeffer's Quantitative Analyst Chris Prybal pointed out via an internal email, $29.80 marks the halfway point to Microsoft Corporation's (NASDAQ:MSFT) all-time high. What's more, the stock's double-2009 low is also just shy of $30. Against this backdrop, the $29-$30 region could be tough to crack for Microsoft in the near term.

However, while MSFT option traders have accelerated their bearish bets, the analyst crowd remains firmly entrenched in the bulls' camp. Despite signs of waning PC sales, MSFT boasts 14 "strong buys" and two "buy" endorsements, compared to 13 lukewarm "holds" and not a single "sell" or worse rating. Should the firm unveil weaker-than-expected earnings on Thursday, April 18, or should the stock encounter familiar headwinds in the $29-$30 area, a round of negative analyst notes could exacerbate selling pressure on the shares.

At last check, Microsoft is fractionally higher at $28.83, amid rumors of a wearable touch-screen watch in the works.


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