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Microsoft Puts Flying as Shares Slide

Things may be getting hard for

Mister Softee


One day after


(MSFT) - Get Microsoft Corporation Report


Bill Gates

was grilled by Congress, options traders are sending the price of the company's puts up in a busy day of trading on the

Pacific Exchange


With its shares trading down 2 1/8 to 82 3/8 halfway through today's session, traders moved quickly to buy puts for protection from any further downside or, perhaps the unspeakable, for playing a prolonged slump. The front-month play (the term used to described options contracts in the current month's expiration cycle) was the most popular as volume on the out-of-the-money March 80 put reached 3,540 at midday and rose 1/16 ($68.75) to 1 3/8 ($137.50). The in-the-money March and April 85 puts also posted impressive volume this morning. More than 1,400 of the each contract traded. The price of the April 85 puts was up 1 ($100) to 4 3/4 ($475) and the March 85 climbed 1 ($100) to 3 1/4 ($325).

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Investors buy puts, contracts that give the holder the right to sell the company's shares at a specific price by the third Friday of a given month, to get protection from a slip in the stock price. Often, investors who hold a company's shares will opt to also buy puts to give themselves a solid exit price.

"It's hard to tell what the activity is, but it could be some people protecting their positions, some people speculating," said Jay Shartsis, the head of options trading firm

R.F. Lafferty


Traffic in Microsoft calls was lighter but concentrated in the same March 80 and 85 strike price range as the puts. Prices of those calls, however, were falling quickly today. The March 80s dropped 1 1/2 ($150) to 3 7/8 ($387.50), despite the fact they were still in the money. Shartsis said the deep open interest at the 85 strike price means that price will likely serve as a short-term ceiling for the shares.

* * * * *

Options plays on polyester company


(UFI) - Get Unifi, Inc. Report

were hopping

for a second consecutive day. With the stock up just 1/8 to 37 13/16, traders saw hope in the March 45 calls and subsequently sent volume to 1,000 by just after noon EST. The price of the contract also was rising, up 13/16 ($81.25) to 1 ($100) on the day.

While the options strategist Larry McMillan's daily alert recommended Unifi options today, his readers were pointed to the April 40 calls, which had traded 248 contracts for about 3 ($300).