Microsoft Options (MSFT): Unusual Trading Activity

| September 26, 2012 | 0 Comments

MSFT OptionsOptions in mega software company Microsoft (MSFT) are starting to light up the options radar in a big way.

“Mr. Softy” is drawing a lot of positive options attention from investors.  The software company’s upcoming earnings announcement is just a few short weeks away on October 18. 

In fact, options activity in MSFT over the last week has been well above average.

What’s going on?

Despite reporting its first EPS loss of $0.06 last month, the software giant’s stock is stuck in a tight trading range.  It’s been trading between $31.50 and $28.50 a share over the last few months.

But now, option traders clearly think it’s going to break above this range.  And they’re ready to take advantage of the situation.

Yesterday during the trading session, our tracking system picked up a block trade of 52,000 MSFT NOV $31 strike call options.  They traded at an average price of only $0.62 a piece.

This investment in MSFT is $3,100,000.  But it carries unlimited upside potential.

This is a great calculated bet that takes the trade past the next earnings announcement.  So if the trader is wrong, he still has some time to maneuver his position.  If he’s right, then profits will flow in like water over a dam. 

But why be so bullish on MSFT?

As I’m sure you know, Microsoft develops the Windows PC operating system, the Office suite of productivity software, and enterprise server products.

The Windows PC and Office franchises collectively account for nearly 60% of the firm’s revenue.  The server and tools business contributes 24%.

And the rest comes from the firm’s other businesses, including the Xbox 360 video game console, Bing Internet search, business software, and software for mobile devices.

No question about it, Microsoft remains a force to be reckoned with in the software space.

But here’s why traders are loading up on MSFT call options today…

I believe they’re trying to take advantage of Microsoft shares trading at the bottom of their recent trading range.  They obviously believe a positive earnings announcement will act as a fast upside catalyst for the shares.

And don’t forget, the software giant has a couple aces up its sleeve. 

First off, Microsoft’s new Azure platform is poised to develop into a larger business than their historical cash cows… such as Vista and Office.  Azure is the company’s revolutionary cloud computing platform.

Also, Microsoft’s partnership with Nokia (NOK) should drive large market share gains for the Windows Phone platform.  In fact, the venture should create the next $1 billion-plus annual revenue stream for the company.

Bottom line… MSFT has a lot going for them.  And I believe this large call position is a very smart play.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.