Last week I watched in fascination as a seller of the MSFT Jan '07, 27.50 (sym: VMFAS) calls sold tens and tens of thousands of calls. Each individual call covers 100 shares of MSFT. The week before the same thing happened. Rightly or wrongly, the voice in my head said, "That's gotta be Ballmer". Now just reading CNET, (and an article on how Google could very easily supplant Microsoft), I'm beginning to put 2 and 2 together. Forbes also has a new article on MSFT sinking, relative to Google. In Forbes, Ballmer's new strategy is "Defying Gravity." Interesting. Microsoft didn't have to acknowledge any "gravity" in years past. I think a call seller that big can only be long the stock. I've watched the daily actives for years and haven't seen anything like it. It was always clear the seller was lurking there for more size, and he was. In the absence of owning the stock, even billionaires would feel a solid kick to the crotch for selling that many calls, if MSFT were to skyrocket. Never mind the high margin needed to sell the calls naked. I think it's possible that MSFT is presenting it's best face to the public, while the alarm bells are going off inside the company. Hopefully knowledgeable tech people can weigh in here, and describe what Google could do to make Microsoft vulnerable. If it's possible you can almost bet the smarty pants at Google have considered it. Is MSFT vulnerable in some way, going forward?
Selling calls is a terrible hedge and Ballmer would NEVER sell exchange-calls/OTC. It would take one phone call to Goldman to effect a call sale or collar as an OTC transaction. Maybe Ballmer did the trade OTC and a wirehouse is laying it off, but extremely unlikely. Why risk it with such a public-trade when it could be done effortlessly through a large ibank.
The Jan 07 27.5 calls only have an open interest of 170,000. Nothing special there at all. Don't forget that msft has 10 billion shares outstanding.
Do you mean the Jan '07 27.00 calls? I am going to assume that is what you meant, as I cannot find an '07 27.50. In reply to selling lots of 27.00 Jan '07 calls, the open interest on it doesn't look that unsual to me. For example, look at the open interest of the Jan '07 27.00 puts by comparison: http://www.cboe.com/DelayedQuote/QuoteTable.aspx In reply to your second question, it makes no sense in the context of your first question. If indeed GOOG were to be a threat to "supplant" MSFT, it certainly wouldn't be by Jan of '07!!!! Assuming you mean longer term, there have been all kinds of "threats" to MSFTs business in the past. While the talent at GOOG is nothing to take lightly, for crying out loud, GOOG is a one product company that is based on similar revenue streams as YHOO EBAY etc. Why is this one any different? nitro
C'mon Nitro, we all know you are talking "your book". You been scaling in long 30 shares at a time for awhile right? 16 consecutive closes lower doesnt change your opinion?
I'm curious about such an OTC transaction. How would it work? Also, speaking of transactions outside the regular 6 option exchanges, Instaquote shows large option transactions on the CIN. Is that Cincinatti?
Bowgett, I think at least part of it can be attributed to MF distribution as a result of the SPX rebalancing.
=================== Selling calls last couple of weeks, well they got the direction right; however I better not comment much on a call strategy right now. 30 billion spread out on MSFT buyback may not help much; if spread out a long time. MSFT must be vulnerable in some way ,going forward, to put it simple; however MSFT is a better brand liquid wise.