MicroStrategy Bounce Cheers Call-Options Buyers - TheStreet

What a difference a day makes. On Monday,

MicroStrategy

(MSTR) - Get Report

shares fell 37% after a key

Merrill Lynch

analyst knocked the stock.

By midday Tuesday, though, the e-business software company had run up more than 9% to 42 9/16, and options players continued their infatuation with its call options.

McMillan Analysis

cited strong options volume and rising implied volatility -- the market's measure of how much it thinks the stock can move in either direction -- beginning Friday and continuing Monday.

On Friday, MicroStrategy rallied on rumors that it was receiving a $100 million private placement. On Monday, when it didn't materialize, the stock got pummeled.

Today, however, it's back on the upside and options speculators are dutifully following. The June 40 calls traded more than 400 contracts and the out-of-the-money June 45s traded 465 contracts.

Each strike's premium rose considerably. The June 40 calls were up 1 5/8 ($162.50) to 5 1/2 ($550) and the 45s rose 1 3/8 ($137.50) to 3 3/8 ($337.50).

The action didn't stop there; traders also went for the more speculative June 50 calls. Volume topped 380 by midday as the price jumped 3/4 ($75) to 2 ($200).

According to a

Reuters

report, on Monday Merrill Lynch analyst Christopher Shilakes said last week's run-up was unwarranted; the company's shares had doubled in price last week, finishing up 39 5/8 to 62 1/4.

MicroStrategy stock had also fallen sharply earlier this year after it changed the way it reports revenue to conform to

Securities and Exchange Commission

guidelines.

Index options players were getting their expiration-week bets on the table a little early today.

With options expiration in the offing, professional traders often gamble on short-term moves to result in big swings in options premiums (or prices). June options expire Friday and today's action was showing some signs of just that type of speculation.

It was perhaps most evident in trading on the

American Stock Exchange's Nasdaq 100

(QQQ) - Get Report

unit trust options. The QQQ was off slightly, down 1/4 to 90 1/2 at midday, but that didn't stop traders from playing the possibility of a big move before Friday.

Much of today's trading was in the June 90 puts and calls. The June 90 calls traded more than 10,000 contracts and the puts volume exceeded 9,200 halfway through the session.

Playing these so-called at-the-money options -- contracts with strike prices equal to the current market price of the underlying stock -- shows traders unwilling to speculate on a very drastic move. Typically, if they were expecting a big swing, they'd take a shot on out-of-the-money options, those that only expire with value if the stock moves dramatically between now and Friday.