The Play Of The Day
07-11-99 24:39 EST
Good Evening Stock Fans!
I wanted to get tomorrow's Play of the Day out to you early. It is an option play that I am going to take $2,000 of my gained Capital from other trades and RISK 100% of it, in hopes for a very big reward. I am playing 2,000 because it could turn into $20,340.00 in just days. That is a 1000% + gain. I am keeping in mind that I could loose my entire investment!
OK, With that covered here it is:
Tomorrow's Play of The Day is: Microsoft, INC (NASDAQ: MSFT)
OPTIONS: The MSFT AUGUST 21, 1999 $110.00 CALLS (SYMBOL: MSQ HB) on close 07-09-99: ASK (.6250) 5/8 BID 9/16 (.56250) per contract 1 contract = 100 shares.
Let me point out here that (NASDAQ: MSFT) Aug $110.00 CALL OPTIONS (MSQ HB) currently have a "strike price" (target on a stocks option) of over $11.50 of what is called "out of the money" (stock options price is within $5.00 of target strike price). When we are talking about Microsoft (NASDAQ: MSFT) that is a TON! What really blows me away, is that this past Friday, July 09, 1999 (NASDAQ: MSFT) MSFT (MSQ HB) traded 3,195 contracts. This kind of volume on an option so far out of the money is unheard of. Imagine this: if you bought MSQ HB's on this past Friday, you would have paid about 5/8 (.6250) for each contract. Let's say you bought 10 of them, than the price would be calculated as follows.
.6250 x 1000 = $625.00 + commissions
What is so strange is if you would have bought these options at .6250 or 5/8, your investment drops by 17.50% just on the spread between the ASK (at .6250 or 5/8) and the BID (at .56250 or 9/16). To put this into perspective, the cost of 100 contracts would be 10,000 x .6250 = 6,250.00. Immediately upon purchase you would lose 10% of your investment as $6,250.00 -$5,620.00 = $630.00
Why do I bring all this up as STRANGE? I am sure some of you have heard of investors throwing down a little money on an option in hopes the stock it is associated with moves big to the side they are betting on. However, when 3,195 contracts trade or 319,500 share of MSFT are borrowed at this price it is just unacceptable to assume all these stock options were not bought with HUGE (NASDAQ: MSFT) moves to the upside when 3,195 options trade this far out of the money! Stock Fans, it sure looks like something is up!
So what could it be? Well, (NASDAQ: MSFT) has an earnings report coming real soon. In fact, they are scheduled to report on July 19, 1999 - that is 1 week from tomorrow. Microsoft (NASDAQ: MSFT) should come with big numbers on that date. Are they enough to take this stock currently at $93.25 up and over $115.00 dollars a share as 3,195 MSQ option contracts are betting it does before Aug. 21, 1999? I would not rule it out completely, but I would not think so. OK, what about a neat new MSFT product like Office 2000? Sorry, Stock Fans! Office 2000 is really cool, but it is not going to take MSFT to all time highs up and over $110.00 to $115.00 a share.
So what is it then? I know MSFT will look to run up into earnings coming Monday. With it running up and all time highs be taken out, MSFT will be looking to "split" yet again - and you know what that can do to a stock! How about over $20.00 a share increase? Hey, MSFT is a TECH stock, a BELL WEATHER it can't be run up like a NET STOCK can be.
Lets take one more look at MSFT options. This time lets look at the exact other side of MSFT MSQ HD. The MSFT August $75.00 Option Puts. They are the reflexive answer the MSFT MSQ HD August $110.00 calls. We determine this by the current price of MSFT Stock at $93.25. It goes like this
$110.00 - $93.25= $16.75.
So then $93.25 (MSFT current share price) - $16.75= $76.50.
The Stock option here that correlates is MSFT (Symbol: MSQ TQ) August $75.00 Puts. Well, The BIG NEWS HERE IS MSQ TQ on Friday had ZERO volumes and the MSFT MSQ HB had 3,195.00. Yes, 3,195.00 to ZERO is pretty much a DEAD giveaway.
Stock Fans! There you have it today's Play of The Day MSFT (Symbol: MSQHD) MSFT $110.00 August 21, 1999 OPTION CALLS.
Buy area: OPEN OF OPTIONS MARKET
Sell Stop NONE
Target: 7 days MSFT stock to $110.00 +
Mr. Softy Stock Looks Anything but SOFT!
Stock Fans! I will look to buy MSFT stock as well at about $91.93750. I see that as just about as low as this one looks to go. If I feel I am about to miss the MSFT train leaving the station NORTH! Then I will look to get shares of MSFT anywhere between $92.00 - $93.25. I have a target on this stock set at $110.00 plus. So I will give away a few pennies to own MSFT stock for what looks to be a VERY BIG MOVE.
What do I think may cause MSFT to move so big as the trading of 3,195 MSQ HD Call Options would suggest?
I think that MSFT will go after (NYSE: CPQ) ALTAVISTA! It sure seems to fit as Microsoft Internet Explorer deal with (NYSE: AOL) is all but over. MSFT will soon lose over 17.9 paying AOL customers. AOL bought Netscape in late 98 to handle all its web browser needs leaving no need for MSFT services anymore.
Will GATES let Microsoft lose it web based presence. I don't think so! I really believe that MSFT will go after CPQ's ALTAVISTA. After all, let us not forget that CMGI has interest in CPQ stock now. CMGI looks to prove to be a perfect negotiator for CPQ's stock and, of course the GEM that has been making CPQ's stock go up of late ALTAVISTA.
Well, I ask myself one question? Would MSFT getting a hold of CPQ's ALTAVISTA be reason for MSFT shares to LIFT OFF into ORBIT! YES! Without a doubt news like that would surely do it. We shall see...
What a segway today's...
Compaq Computer (NYSE:CPQ). I like it here to go higher as NEWS maybe coming. It also looks to go through the open area in its graph of $27.8750- $29.93750. (NASDAQ: CPQ) had large trading volume on Friday as it went up on more volume. This is a very bullish sign. I am looking for CPQ to trade above $32.50- $33.1250 dollars a share again real soon
Buy area: $27.00
Sell Stop: $24.8750
Target: $32.50 $33.1250 perhaps 5-11 trading days.
"Run The Option!"
Stock Fans! There was plenty of volume on (NYSE: CPQ) Options Friday. It had about a 2 to 1 Calls to Puts ratio in heavy options trading. I am looking to play (NYSE:CPQ) August 21, 1999, $30.00 Call Options. Symbol: CPQ HF. I also point out here that (NYSE:CPQ) Put options the August 21, 1999, $20.00 Put Options had ZERO VOLUME. This means that investors are only willing to bet one way on this one, and this is HIGHER.
Have a great day!
See you in my LIVE TRADING ROOM today.
More to come...