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Most Active Options Update: Microsoft Corporation (MSFT)

Microsoft Corporation option bulls roll the dice on another multi-year peak

by 6/30/2014 12:33 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). Falling off the list since last time was Pfizer Inc. (NYSE:PFE).

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Microsoft Corporation is trading 0.6% lower today to linger near $42.00, which isn't too surprising considering the stock tagged a fresh 14-year high of $42.29 on Friday. Today's slip hasn't deterred a number of speculators from betting on the security to resume its longer-term uptrend, though, and rally to a new multi-year peak over the next two months.

Taking a brief step back, call volume has soared to more than two times the average intraday pace at last check. Traders are showing a preference for MSFT's short-term contracts, per the stock's 30-day at-the-money implied volatility (IV), which has jumped 6% to 20.8% -- its loftiest perch since mid-April.

The most active MSFT option is the September 44 call, where 38,970 contracts have changed hands -- the majority at the ask price, hinting at buyer-driven volume. Plus, IV is trending higher at this out-of-the-money strike, and only 2,634 contracts make up open interest here, suggesting a fresh batch of bullish bets is being initiated.

The calls are being purchased for a volume-weighted average price (VWAP) of $0.66, making breakeven at the close on Friday, Sept. 19 -- when the options expire -- $44.66 (strike plus VWAP). Gains are theoretically unlimited with each additional step north of here, while losses are capped at the initial premium paid, should MSFT settle below the strike at expiration. Of note, Microsoft has not traded above $44 since April 2000.

On the fundamental front, Microsoft Corporation (NASDAQ:MSFT) announced today it has extended its OEM distribution deal with Bsquare for another two years, this time expanding the partnership into Latin America and Africa. Meanwhile, the company is slated to report quarterly earnings after the market closes on Tuesday, July 22.


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