Microsoft Corporation (MSFT) Option Traders Eye a Quick Breakout

Microsoft Corporation's November 50 call is being bought to open today

by Karee Venema

Published on Nov 17, 2014 at 10:26 AM
Updated on Jun 24, 2020 at 10:16 AM

Call players have set their sights on Microsoft Corporation (NASDAQ:MSFT) this morning, with the contracts crossing the tape at a rate five times the intraday average. Short-term options are in high demand, too, as evidenced by the stock's 30-day at-the-money implied volatility (IV), which has jumped 8.4% to 16.7%. Drilling down, the equity's November 50 call has seen the majority of the action, and it appears a number of speculators are rolling the dice on another fresh 14-year high by week's end.

At last check, 30,863 contracts have been traded at this out-of-the-money strike -- mostly at the ask price, hinting at buyer-driven activity. What's more, IV is up 10.2 percentage points, and volume outstrips open interest, two signs new positions are being initiated.

Based on the volume-weighted average price (VWAP) of $0.13, at-expiration breakeven for today's call buyers is $50.13 (strike plus VWAP), or territory not charted by MSFT since March 2000. Gains will accumulate north of here, while losses are limited to the initial premium paid, should the stock settle south of the round-number $50 mark at Friday's close, when front-month options expire.

From a wider sentiment perspective, bearish betting has been popular on Microsoft Corporation (NASDAQ:MSFT) in recent months, despite the equity's impressive 31.6% year-to-date advance to trade at $49.25. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.88 ranks in the 95th percentile of its annual range. Should sentiment continue to shift to the bullish side, the security could be in a position to extend its recent uptrend.


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