Microsoft (MSFT) adds 16 cents to $30.88 and is one of 25 Dow stocks holding gains heading into midday trading Tuesday. One player in the options market seems to be anticipating additional gains for the software-giant and bought a Dec 28 – 33 bullish risk-reversal on MSFT for a penny, 24000X. Puts were sold to buy calls and open a new position. The combo doesn’t look tied to stock and takes advantage of a bit of vol skew, as the 25 delta put on MSFT in the December term has IV of around 24.9 percent compared to 20.9 percent for the equivalent .25 delta call. Another noteworthy trade in MSFT today is a 10000-lot of Jan 2014 37 calls sold to open for $1.31 per contract and probably tied to 336K shares for $30.79.
Overall options volume in MSFT is 68,000 calls and 40,000 puts and higher than the normal midday volume of 60,000 contracts. 30day evels of implied volatility are up about 2 percent to 20 and in the 30th percentile of the 52-week range (16 – 41.5). The stock has been grinding higher along with the broader market since late-July — up 7.1 percent since 7/25. Looking forward, the company’s Windows 8 is due to be launched Oct 26 and earnings are expected mid-to-late October as well.
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.