Microsoft Corporation (NASDAQ:MSFT) stock had a fantastic 2014, with stock prices going up by more than 27%. Many analysts and investors feel that Microsoft Corporation (NASDAQ:MSFT)’s growth in 2015 is hinged mainly on the Windows 10 release. If Windows 10 attracts many enterprises, which did not opt for Windows 8 upgrade, It will be a great bonanza for Microsoft Corporation (NASDAQ:MSFT) in 2015. Fast Money Traders Dan Nathan and Pete Najarian talked on CNBC about one particular option bet on Microsoft Corporation (NASDAQ:MSFT) stock and shared their opinion on the stock.
Nathan pointed out that the call volume for Microsoft Corporation (NASDAQ:MSFT) stock went up on a daily average by three times when compared to puts. He mentioned that there was one particular option bet which attracted him.
“[…] There was actually one really large trade that caught my eye. Out in Jan 2016 expiration. That is a year from now. A trader sold 15000 of the Jan 2016 $52.5 calls at $1.50 and likely they did that against long stock about 420000 shares at $46.35. This was likely an override of 1.5 million shares. Let me just tell you what’s going on here. The trader has long 1.5 million shares of stock. They sold those 15000 Jan 2016 $52.5 calls. That would actually be a break even above the 1-year high and also looking out the 14 years. One of the main points about selling a call against your long stock is their yield. Microsoft is a stock that yields 2.7% from its dividend, but that yield would be an added 3% creating a super yield. This trader is obviously looking to take advantage of high implied volatility that is the price of options. This trade, the breakeven is up 17%. So yes it is taking a breather, but you are actually getting paid to own the stock and you have this 6% buffer between the dividend and the call sales to the downside,” Nathan said.
He pointed out that the trader is actually tried to take advantage of the breather period in Microsoft Corporation (NASDAQ:MSFT) stock and looking to get paid for holding onto the stock.
Najarian said that he would stick with Microsoft Corporation (NASDAQ:MSFT) stock and he added that he likes what the trader is doing with the options. He said that the trader is trying to enhance the yield. He said that return for the trade is really great.
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