MSNBC Duo Microsoft and GE Get a Boost in Options Market
With two trading weeks left before expiration, investors are taking positions in
General Electric
(GE) - Get Report
and
Microsoft
(MSFT) - Get Report
by buying out-of-the-money call options. The fuel under the fire, so to speak, is speculation that some key announcements are on the horizon.
The activity in GE options appears to be sparked by talk that the
European Commission
is about to announce a decision concerning the company's plan to buy
Honeywell
(HON) - Get Report
. After the deal was approved by the
U.S. Justice Department
, the company spent several days arguing its case in Europe. The EC expressed concern that the alliance would compromise competition, possibly even forcing some rivals out of the market.
The June 50 calls traded about 7,500 contracts on an open interest of 50,237, with investors laying out between 80 cents ($80) and 90 cents ($90) for the premium. The June 55 calls were the most active, trading nearly 22,000 contracts on an open interest of 69,859. The premium on those calls is listed at 10 cents ($10). According to one floor trader, the activity looks like one investor is unwinding a large position.
Another trader who made several large trades in GE options himself described the activity as a "one-by-three spread" in which he was selling the June 50 calls at 65 cents and buying the June 55 calls at 5 to 7 1/2 cents. By selling the calls closer to the money, an investor collects a premium of $65 per contract, and then puts that capital to work by simultaneously betting $5 to $7.50 per contract on a dramatic upward move in the stock.
In recent trading GE shares were up 4 cents, at $49.04.
As for Microsoft, option volume was expected to receive a pop today given the fact that the
U.S. Court of Appeals
typically announces decisions on Tuesdays and Fridays. (
TheStreet.com
reported similar activity a week ago in the long-term options, and also recently
discussed what a ruling may mean for the stock.) The June 80 calls traded over 5,200 contracts on an open interest of 23,475. The premium on those calls went for 15 cents ($15). Microsoft recently was trading up 90 cents, at $70.07.
Meanwhile, the
Chicago Board Volatility Index
, or VIX, fell 5.89% to 24.43. The index is down 8% in the past month, indicating that investor fear continues to diminish.