Call Options Or Put Options On Microsoft (MSFT)?
Microsoft (MSFT) is one of the world’s largest software company. The company’s Windows operating system is used on a vast majority of personal computers in the world.
MSFT shares are trading at $31.88 after dropping 5% yesterday. The stock’s up 24% from the 52-week low of $25.68 and is 12% below the 52-week high of $36.18.
Is this an opportunity to buy call options on MSFT with the company’s purchase of Nokia’s (NOK) phone business? Or should you buy put options on MSFT because the company is too far behind the leaders in the ultra-competitive mobile phone industry?
The bulls make a convincing argument…
MSFT made a big splash this week by announcing the purchase of Nokia’s (NOK) phone business for more than $7 billion. By doing so, Microsoft is making a statement that the company will not hand over the mobile industry to Apple (AAPL) and Google (GOOG).
MSFT now has the capability to merge its dominant software business with a robust hardware business – all under one roof.
This is a huge and necessary move for the software giant as consumers shift from a PC dominant world to a mobile device driven society. Now Microsoft can take its decades of expertise in software and wed it to an established pioneer in the mobile phone industry.
But the bears have a compelling case as well…
MSFT is still light years behind both Apple and Google in the mobile phone space. Apple has the single most popular phone (iPhone) while Google has the dominant mobile operating system (Android).
It will be a tough climb for MSFT, a very distant third in the industry, to catch up to the two industry leaders. And, at the cost of $7 billion, Microsoft is betting heavily that it can beat the odds.
Plus, MSFT now has the difficult tasks of integrating NOK into its business and convincing developers to create more apps for phones with the Windows operating system. Those will both prove to be major challenges for the future.
So is MSFT’s NOK purchase a good thing, or is the company too far behind the industry leaders for it to matter?
If you think the bulls are right, take a look at buying the MSFT October $32 calls for around $1.00.
If you think the bears are right, take a look at buying the MSFT October $31 puts for around $0.75.
Yours in Profit,
Gordon Lewis
Category: Call Or Put Options?
