Major Option Volume In MSFT, September 28 Calls, January 2012 30s

Microsoft (MSFT) options were active on the ISE Today. On my ISE widget it was the most active on the call side. As of 3:30 it had an ISEE Ratio (customer calls opened/puts opened x 100) of 17,814. In total, across all strikes, 154,624 calls traded and 868 put contracts were opened on the ISE exchange. According to CrimsonMind.com, someone *bought 110,000 September 28 calls at $0.24 and 20,000 at $0.23 (130k total). They noted the bid/ask was 0.22/0.24 (activity was closer to the ask). Also, 30,000 January 2012 30 calls were *sold at $1.98 and 20,000 at $1.97 (50k total). The bid/ask in this case was 1.97-2.03, closer to bid. Hschwartz over at *Whatstrading.com said the September calls were bought and the January 2012s were sold. He also mentioned a 700,000 share hedge and a big spread yesterday. That's some decent institutional size making moves.

If I'm calculating this correctly about $3 million exchanged hands in the September call and $9.8 million moved on the January 30 call. A total of 137,000 contracts traded on the Sep 28 strike with 4,990 open. MSFT closed at $25.95. If the September calls were bought-to-open and MSFT gets above $28.23-$28.24 before 9/17, they'd be in the money. However if MSFT sells off hard and the 50,000 January 2012 30 calls were sold-to-open, they'd be up around $6.8 million anyway. Ha, is it really that easy? There's probably much more involved with this trade (underlying shares/other spreads as noted above) but today's action was still interesting given the size. Here's a view of the option volume from Google Finance and my ISE widget.


MSFT September 2010 Option Snapshot (Google Finance)


MSFT January 2012 Option Snapshot (Google Finance)


ISE Widget 3:30, MSFT (on right sidebar)


MSFT just broke through a downtrend line/descending channel (like the market) and is now testing ceiling resistance. You can see the new sideways channel. MSFT is just above the 50 day moving average (blue) but the 200 day moving average (red) is up above and rolling over, which could act as resistance going forward. It could re-test the recent low of 22.73. $27ish is upside resistance. I wrote about the death cross and historical MSFT P/E ratios on 6/28.


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