Brian Stutlands Sees Unusual Options Activity In Microsoft

On CNBC's Options Action, Brian Stutland spoke about trading activity in Microsoft Corporation MSFT on Tuesday. He said that the stock was pretty weak, but call options outnumber puts 1.5 to 1.

There was also a big trade that caught Stutland's attention. A trader bought 10,000 contracts of the January 2017 45/55 call spread for $2.60. The trade break evens at $47.60 and it can maximally gain $7.40 if the stock trades to $55 at the January 2017 expiration. For this trade to be profitable, Microsoft has to jump approximately 17.6 percent and to reach its maximal profit the stock has to gain approximately 36 percent.

Stutland thinks that this stock replacement strategy has a good chance of success because he expects big moves in the market. He would rather own this call spread than the stock at the moment because Microsoft has been trading in a range between $40 and $50 and he doesn't want to own the stock if it trades below $40.