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By Jud Pyle, CFA, chief investment strategist for the Options News Network

Heavy options activity for


(MSFT) - Get Microsoft Corporation Report

hit the tape today as at least one investor could be betting that Microsoft volatility will move a bit more after significant selling trends back in February.

Looking at the January 2010 25 calls, we see that more than 44,000 contracts changed hands so far today vs. current open interest of 167,810. These calls are currently trading for around 60 cents, essentially unchanged throughout the day, with an implied volatility of 35.1.

Now looking at the Jan. 2010 15 puts, more than 42,000 contracts have traded so far today vs. current open interest of 105,005. These puts are currently trading for around 92 cents, which is also virtually unchanged from yesterday's close. Current implied volatility for the Jan. 15 puts is 44.2.

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This could be one investor taking profits after selling the strangle in February. On Feb. 13, I highlighted the Jan. 2010 15-22.5 strangle because more than 28,000 strangle contracts sold for around $3.60 per contract, with the stock trading at $19.30.

Back then, the implied volatility of the calls was 41 and the implied volatility of the puts was 53. That is a far cry from strangle activity today, with volatility coming in significantly from February levels. Despite the tumult we saw between mid-February and the beginning of March, this strangle is still a winner. This customer most likely sold to open the Jan. 15-22.5 strangle in February and is now buying to close the Jan. 15-25 strangle at lower volatility levels, meaning higher profits for him.

In midday trading, investors were slightly bullish on the world's largest software maker as the stock inched up about 0.2% to around $19.50. MSFT shares have not visited annual-low territory since March 6, when the stock hit $14.87, but the shares have been hovering around the $19 level since the beginning of last month.

In other news, MSFT announced its first bond offering today. Rumors have emerged suggesting that MSFT is attempting to raise money for share-buybacks and acquisitions, such as a bid for German-based technology provider



Looking ahead, MSFT needs smart M&A decisions for investors to regain confidence in the company after share prices declined 25% over the last five years. When companies issue debt, the stock can become more volatile. So at least one investor is betting that volatility of MSFT shares could increase in the near future, or at least increase enough to make buying back strangles worthwhile.

Jud Pyle is the chief investment strategist for Options News Network ( and the portfolio manager of Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."