Microsoft Options (MSFT): Unusual Trading Activity
Options in mega software company Microsoft (MSFT) are lighting up the options radar in a big way today.
You didn’t think we’d go through earnings season without mentioning “Mr. Softy,” did you?
As one of the largest components of the Dow Jones and the Nasdaq, the way Microsoft responds to earnings will have a big effect on these two major indices.
Options activity in MSFT over the last week has been 10 times above average.
Certainly option traders know this and seem to be a little concerned this morning.
You see, trading has been very sporadic following tech stock earnings reports. Many companies have traded down despite better than expected numbers.
I think one trader is expecting the same to happen with MSFT.
Ten seconds after the opening bell this morning, our tracking system picked up a block of 14,000 contracts of the MSFT April $30 puts. They traded at an average price of $0.06 a piece.
This is certainly a speculative bet. Meaning, with only one day left before April expiration, this is a hit or miss options play.
However, if the reaction to Microsoft’s earnings is similar to what we’ve seen from Google (GOOG), Intel (INTC) or Qualcomm (QCOM), this option trader could soon be cashing a big check.
But why so much activity today?
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, and the server and tools business contributes 24%.
The firm’s other businesses include the Xbox 360 video game console, Bing Internet search engine, business software, and software for mobile devices.
This large put activity is in reaction to nothing more than a technical pullback after earnings.
I think MSFT for the long term is still a good investment.
During this past year, Microsoft’s development of the Azure platform is poised to develop into a larger business than the company’s historical cash cows such as Vista.
Also, Microsoft’s partnership with Nokia (NOK) will drive large market share gains for the Windows Phone platform and create the next $1 billion-plus annual revenue stream for the company.
Bottom line… MSFT has a lot going for it. And I believe this large put position is simply the result of other tech giants trading lower right after their earnings announcements.
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Category: Unusual Options Trading Activity
