Options Brief: Microsoft (MSFT)

MSFT – Microsoft Corporation – Options players populating Microsoft Corp. today initiated bearish strategies on the stock with the software maker’s shares edging down 1.15% to trade at $25.02 with 40 minutes remaining before the closing bell. One pessimistic trader enacted a ratio put spread in the January 2010 contract to position for continued erosion in the price of the underlying shares through expiration. The investor purchased 5,000 puts at the January 2010 $25 strike for a premium of $2.25 each, and sold 10,000 puts at the lower January 2010 $20 strike for a premium of $0.74 apiece. The net cost of the transaction amounts to $0.77 per contract. Thus, the trader is poised to profit if MSFT’s shares decline another 3.15% to breach the effective breakeven price of $24.23 by expiration day. Maximum potential profits of $4.23 per contract are available to the investor if the software giant’s shares fall 20% from the current price of $25.02 to settle at $20.00 at expiration. The overall reading of options implied volatility on the stock is up 5.2% to 29.07%.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.