MSFT – Microsoft Corp. – Reporting from CNBC’s David Faber this morning that activist fund ValueAct Capital Management LLC has acquired a $2 billion stake in Microsoft Corp. lifted shares in the world’s largest software maker today, with the stock up 3.5% at $30.80 as of 12:10 p.m. ET. Options volume on MSFT is fast approaching the stock’s average daily level, with roughly 210,000 contracts in play as of midday. Fresh interest in weekly call and put options suggests some traders are positioning for the price of the underlying to extend gains in the near term, while others are betting the shares will lose steam by the end of the week. The April 26 ’13 $31 strike is seeing the most volume among the weekly contracts, with around 6,000 calls and roughly 8,000 puts traded so far. Bullish strategists appear to have purchased most of the calls for an average premium of $0.25 each, and may profit at expiration in the event that MSFT’s shares top $31.25. Meanwhile, traders bracing for shares to reverse course snapped up around 6,000 of the $31 strike puts at an average premium of $0.35 apiece. Put buyers make money as long as the price of the underlying settles below the breakeven point at $30.65 by expiration. Overall trading traffic is favoring puts over calls as of the time of this writing, with the call/put ratio hovering around 2.6 as of 12:15 p.m. ET.
GILD – Gilead Sciences, Inc. – Upside call options are changing hands on Gilead Sciences today, with shares in the biotechnology company rising as much as 1.9% to a new 52-week high of $54.20 during the first half of the session. Trading traffic in the weekly options on Gilead suggests some traders anticipate fresh highs leading up to the firm’s first-quarter earnings report on May 2nd after the closing bell. The April 26 ’13 $55 strike calls are seeing the most volume, with upwards of 2,800 contracts changing hands versus open interest of 202 lots. It looks like traders purchased most of the call options for an average premium of $0.58 each. The bullish bets make money at expiration this week as long as Gilead’s shares rally another 2.5% to top the average breakeven price of $55.58. The weekly calls expire ahead of the company’s earnings release next Thursday.
PWER – Power-One, Inc. – Shares of solar inverters and power management solutions provider, Power-One, Inc., are up 57% this morning at $6.35 after the company agreed to be acquired by power and automation technology group, ABB, for $6.35 a share. Trading traffic in Power-One call options this morning suggests some traders may be taking profits on existing bullish positions. A review of open interest in the May $5.0 strike calls suggests most of the 4,828 contracts were purchased during the first two weeks of April for between $0.10 and $0.15 each. Today, it looks like more than 3,600 of the May $5.0 strike call options were sold at an average premium of $1.30 apiece. Similarly, call open interest of 3,703 contracts at the July $5.0 strike was partly established as recently as Thursday and Friday of last week. Time and sales data indicates roughly 1,300 of the July $5.0 strike calls were purchased at the end of last week at a premium of $0.20 each. This morning, some 1,500 of the call options were sold at a premium of $1.30 per contract. Traders who purchased the $5.0 strike calls this past Thursday and Friday appear to have made six times their money over the weekend.