By Mike Yamamoto of OptionMonster
NEW YORK -- Microsoft (MSFT) is trading at its best levels in 14 years, and options are looking for even more gains this summer.
OptionMonster's tracking system shows that about 32,000 September 48 calls traded on Friday as premiums rose from 20 cents to 26 cents, including 20,000 that were bought in less than one minute. These are clearly new positions, as open interest in the strike was only 1,590 contracts before the session began.
The long calls lock in the price where the stock can be purchased through mid-September, no matter how far it might climb. They could be sold earlier at a profit if premiums rise further with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $48.
The software giant hasn't traded above $48 since April 2000, but is up 40% in the last year with renewed optimism over new CEO Satya Nadella and his emphasis on cloud-computing initiatives, as well as surprising strength in the PC business.
Microsoft rose 0.23% on Friday to close at $44.50. The stock spiked to $45.71 on July 17, a few days before the company's last earnings report.
Total Microsoft calls outnumbered puts by 2 to 1 on Friday.
Yamamoto is long Microsoft.
Now let's see what TheStreet Ratings has to say about Microsoft.
TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate MICROSOFT CORP (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows: