Here's How Large Option Traders Reacted To Microsoft's Surface Event

Microsoft Corporation MSFT shares have been a top performer among mega-cap tech stocks in 2019, gaining 32.1% year to date.

Shares traded lower by 2% on Wednesday after the company unveiled its latest updates to its Surface Pro lineup and also sprung some surprise product announcements as well.

Product Announcements

As expected, Microsoft unveiled the new Surface Pro 7 tablet with a detachable keyboard. The Surface Pro 7 will feature a new USB-C port and will start at $749.

Microsoft also unveiled its Surface Laptop 3, which will come in 13-inch ($999) and 15-inch ($1,199) sizes. The Surface Laptop 3 will include the latest processor from Intel Corporation INTC, which reportedly can double the processing speed of the Surface 2 chips.

One of Wednesday’s big surprises was the unveiling of the Surface Neo, an innovative two-screen device with a pop-out keyboard. The Surface Neo’s two screens operate independently of each other, and Microsoft said it expects the Neo to be available by holiday season 2020.

The other big surprise on Wednesday is news that Microsoft is partnering with Alphabet, Inc GOOG GOOGL to launch the Microsoft Duo, a foldable smartphone that can run two different apps on two different screens at the same time. The Duo will also be available by the end of 2020 and features two 5.6-inch screens that are connected by a 360-degree hinge. The Duo will ron on Google’s Android operating system.

Microsoft also unveiled a new Microsoft Surface Pro X laptop and new Surface Earbuds.

Options Action

Benzinga Pro subscribers received seven option alerts Wednesday morning related to unusually large Microsoft options trades. Here are the four largest:

• At 10:02 a.m., a trader sold 500 Microsoft put options with a $138 strike price expiring Oct. 18 near the bid price at $4.55. The trade represented a $227,500 bullish bet.
• At 10:04 a.m., a trader sold another 563 Microsoft put options with a $138 strike price expiring Oct. 17 near the bid price at $4.493. The trade represented an $252,955 bullish bet.
• At 10:33 a.m., a trader sold 1,272 Microsoft call options with a $140 strike price expiring Nov. 15 near the bid price at $2.801. The trade represented a $356,287 bearish bet.
• At 11:13 a.m., a trader sold 1,500 more Microsoft call options with a $140 strike price expiring Nov. 15 at the bid price of $2.84. The trade represented a $426,000 bearish bet.

All together, five of the large option trades on Wednesday morning were calls purchased at the ask or puts sold at the bid, trades typically considered bullish. The other two were calls sold at the bid, trades typically considered bearish.

Benzinga’s Take

The mixed option trading on Wednesday morning is a signal the market doesn’t quite know what to make of the new Microsoft product lineup. It’s noteworthy that all the large option trades following the product announcements were for contracts that will expire within the next two months, suggesting traders aren’t willing to bet on Microsoft’s innovative double-screened devices set to launch in 2020 just yet.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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