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Most Active Options Update: Microsoft Corporation (MSFT)

Microsoft Corporation bears predict a rough few weeks

by 5/16/2014 1:06 PM
Stocks quoted in this article:

The 20 stocks listed below have seen the highest total options volume over the course of the last 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, and highlighted names are new to the list since the last study was run. One equity seeing notable activity among put traders today is Microsoft Corporation (NASDAQ:MSFT).


Microsoft Corporation hasn't gotten caught up in the sell-off plaguing many technology names. In fact, since notching a multi-year high of $41.66 on April 2, the shares have given back a relatively scant 5.2% to their present perch of $39.53. (The stock also recently bounced from support at its 60-day moving average.) Nevertheless, options players have shown an increased interest in long puts, as evidenced by MSFT's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.70. Although the total number of calls bought to open has trumped puts during the past two weeks, the ratio itself is higher than two-thirds of all readings taken during the last 12 months. In other words, long put demand, relative to call demand, has accelerated of late.

Puts have taken the spotlight in today's session as well. Garnering notable attention is the weekly 6/6 37-strike put, where more than 4,000 contacts have changed hands. Nearly all of the volume has traded at the ask price, and implied volatility has ticked 1.4 percentage points higher at the strike, suggesting buy-to-open activity.

Meanwhile, the May 39.50 put -- where the majority of the 6,300 contracts on the tape have traded off the bid price -- has nabbed the most-active slot. While there is no indication of symmetrical blocks trading at similar times, it is possible that some of the activity at these strikes was related, as Microsoft option bears sold to close their front-month positions (expiring today) in favor of the lower-strike positions expiring in three weeks.

Regardless of whether today's weekly options bets are tied to the expiring positions, the outlook is that MSFT will fall south of the $37 level (a drop of nearly 6.4%) before the options expire on June 6. It is noteworthy that Microsoft shares have not closed below $37 since Feb. 10.

If today's bears end up being wrong in their prediction -- and losing some or all of the premium paid -- at least they can rest assured they scooped up their bearish bets at a relative bargain. MSFT's Schaeffer's Volatility Index (SVI) of 17% stands lower than all but 6% of the past year's worth of readings.

Off the charts, Soros Fund Management last night disclosed it had reduced its stake in Microsoft Corporation (NASDAQ:MSFT) by 84%. The stock is little impacted by this news, down less than 0.3% today.


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