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The shares of Microsoft Corporation (NASDAQ:MSFT) are up 6% at $34.33, as traders digest news of CEO Steve Ballmer's looming resignation. As a result, MSFT options are flying off the shelves at a rapid-fire rate, especially on the call side of the tape. So far today, MSFT has seen roughly 422,000 calls and 255,000 puts change hands, compared to its average midday volume of around 68,000 calls and 11,000 puts. Nevertheless, 30-day, at-the-money implied volatility is down 13.2% to 22.2%, suggesting the options market was anticipating a major move.
Attracting notable attention has been the January 2014 35-strike call, which has seen close to 33,000 contracts cross the tape -- mostly at the ask price, suggesting they were bought. Plus, implied volatility is creeping higher, hinting at new positions.
By purchasing the calls at a volume-weighted average price (VWAP) of $1.64, the buyers will begin to profit if MSFT topples $36.64 (strike price plus VWAP) by January options expiration. Risk, meanwhile, is capped at the initial premium paid for the calls, should MSFT remain beneath the strike through the next few months.
On the put side, it looks like one speculator is rolling up an even longer-dated position. Specifically, it appears the trader bought to close 7,845 April 28 puts for $0.63 apiece, and simultaneously sold to open an equal amount of April 31 puts for $1.24 per contract. The investor can pocket the net credit as long as MSFT stays north of $31 through April options expiration.
At last check, Microsoft Corporation (NASDAQ:MSFT) is leading the blue chips by a relatively large margin, and helping to keep the Dow in the black.