Unusual Options Activity in Microsoft $MSFT

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• OPTIONS TRADING RESEARCH

Unusual Options Activity In Microsoft MSFT
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• Hi, My name is Steve and Im with Options Trading
  Research, today were reviewing our recently
  published article

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• Unusual Options Activity In Microsoft MSFT

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• As many of you know, unusual options activity can
  be a valuable indicator as to what traders are
  thinking, and more importantly, where these
  stocks are heading in the short-term.

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• This is something professional options traders
  pay a lot of attention to, and for good reason
  Unusual options activity can tip off big moves
  in a stock, either up or down.
• So lets take a look at some interesting
  activity that caught our eye this week

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• Microsoft MSFT, as you likely are aware, is the
  largest software company in the world. The
  company generates nearly 94 billion in revenues
  and 12 billion in profits per year. For a good
  description of the company, follow the link.

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• MSFT is trading at 43.22, down 6 for the year.
  Thats 12 below the 52-week high, and 10 from
  the 52-week low.

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• So what does unusual options activity in MSFT
  tell us?

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• The stock market has been quite volatile lately
  but has been more down than up. As such, its no
  surprise for large companies like MSFT to be down
  with the overall market.

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• Tech companies have been hit particularly hard as
  investors have been quick to take profits in the
  sector. MSFT was having a mostly quiet year until
  dropping along with the broad market during the
  correction.

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• However, the company is getting ready to release
  some new products heading into the holiday
  season. And, the software giant has been active
  in the acquisition space as well.
• Heres the deal

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• This week, a trader bought a large block of put
  debit spreads in MSFT. Keep in mind, a debit
  spread is any type of spread which results in a
  cash outflow. In this case,the debit spread is a
  vertical put spread,which makes money if the
  underlying goes down,up to a certain strike.

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• Specifically, a trader purchased 8,000 November
  40 puts for 1.16 while simultaneously selling
  the November 35 puts for 0.40. The total cash
  outlay for this trade is roughly 600,000, which
  is the max loss for the trade.

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• On the other hand, the max gain for the trade
  occurs if MSFT closes at 35 or below on
  expiration. Total profit for the spread would be
  3.4 million in that scenario.
• Heres the chart of MSFT

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• As youd expect, MSFT plunged below the 50-day
  moving average during the peak of the latest
  correction. The stock has stabilized around the
  current price, which is still a fair amount below
  the 50-day line, despite having regained ground.

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• This trade could be suggesting that theres still
  quite a bit more downside left in MSFT before the
  end of the year (or at least November). After
  all, the stock has barely been below 40 this
  year (and nowhere near 35).

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• Given the strikes in play, its much more likely
  that this spread is a hedge against a long MSFT
  stock position. The company has beaten earnings
  recently, and could get a boost from holiday
  product launches.

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• The put spread is a relatively cheap way to
  protect against a big downward move.

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• More Options Trading Ideas

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• Keep in mind, theres a lot more unusual options
  activity going on than what we discuss here.We
  just try to bring you what we feel are the most
  significant ones and the ones you might actually
  be able to make some money on!

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