By Mike Yamamoto of OptionMonster
NEW YORK -- The bulls piled into Microsoft (MSFT) as its shares pulled back on Friday.
OptionMonster's trade scanners lit up with big volume in the January Weekly 37 calls, which expire on the first Friday of the New Year. A block of 21,000 contracts was bought for ask price of 89 cents in volume far above the strike's previous open interest of just 1,177, clearly showing that new money was put to work.
These calls lock in the price where the software giant's stock can be purchased no matter how far it might climb. They could generate significant leverage in a rally but will expire worthless if shares remain below $37 through Jan. 3.
Microsoft shares fell 1.42% on Friday to close at $36.69. The stock is approaching its 50-day moving average after a big rally in October and November.
Earlier on Friday, another investor bought 5,000 July 39s for $1.74 and sold 5,000 July 44 calls for 58 cents. Known as a vertical spread, that trade cost $1.16 and will expand to $5 if the stock closes at $44 or higher on expiration -- a profit of 331% on a move of just 20% in the underlying share price.
Total option volume was almost twice the daily average in the session, with calls outnumbering puts by more than 2 to 1.
Yamamoto owns MSFT shares.