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Most Active Options Update: Microsoft Corporation (MSFT)

Microsoft Corporation's new high has option players eager for more

by 4/1/2014 1:16 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Microsoft Corporation (NASDAQ:MSFT).


Microsoft Corporation has seen a 64% mark-up to its average intraday call volume today, as the stock notched a nearly 14-year high of $41.59 earlier. Roughly 81,000 calls have crossed the tape thus far, with more than a quarter of the day's action centering on the May 43 strike. By the looks of it, a number of speculators are banking on MSFT to continue its upward trajectory, and hit another decade-plus peak over the next month or so -- a time frame that encompasses the company's earnings report.

Almost 22,000 calls have switched hands at this out-of-the-money strike, a healthy portion of which have done so at the ask price. Implied volatility is on the rise, and volume exceeds current levels of open interest, collectively suggesting buy-to-open activity.

Diving deeper into the data reveals that a block of 4,000 May 43 calls changed hands earlier around the same time that two symmetrical blocks of 2,000 April 41 and May 41 calls crossed. The higher-strike calls went off at the ask price, while the lower-strike positions traded below the bid price. One theory could be that this speculator is closing out of the 41 strikes to fund her purchase of the 43 strikes as a means of rolling up her bullish bet.

On the charts, MSFT hasn't traded north of $43 since April 2000. However, this isn't to say that the stock has not been putting in a stellar technical performance, with the shares up more than 43% year-over-year. Assisting the equity in its march higher has been its 10-month moving average, and a quick bounce off this rising trendline in February helped MSFT secure a series of higher highs of late.

Additionally, the equity could benefit from another sound earnings report, with the company slated to unveil its quarterly results after the close on Thursday, April 24. After exceeding bottom-line estimates in each of the past two quarters, Microsoft Corporation has gone on to add an average of 4% and 3.6% in the day and week, respectively, that follow. For MSFT's fiscal third quarter, Wall Street is calling for a profit of 63 cents per share -- a nearly 13% drop from the company's year-ago results.

Elsewhere on the fundamental front, Microsoft Corporation (NASDAQ:MSFT) was once again named the top global software provider, according to Gartner. The Washington-based company edged out Oracle Corporation (NYSE:ORCL) and International Business Machines Corp. (NYSE:IBM) for the premier spot.


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