OptionMonster's Heat Seeker tracking programs detected unusual buying in the November 50 calls Monday as the software giant pulled back from a multi-year high. More than 60,000 contracts were purchased, initially for 10 cents, followed by more blocks for as much as 19 cents. Volume was nine times the previous open interest in the strike, showing that these are new positions.
Long calls lock in the price where investors can buy stock, which lets them position for a rally at a relatively low cost. That limits the amount of capital at risk and creates the opportunity for significant leverage if shares move in the right direction.
In Monday's case, the calls appreciated to as much as 34 cents as the stock nudged higher. Those contracts expire at the end of this week.
Microsoft's shares eased back and ended the session at $49.46, down 0.24%. The company has beaten earnings and revenue estimates for the last six quarterly reports.
Monday's total option volume in the name was 22 times its daily average for the last month, though that was inflated by heavy activity as traders looked to capture MSFT's quarterly dividend. Those transactions didn't reflect any directional sentiment.
-- Written by David Russell of OptionMonster
Russell has no positions in MSFT.