Options Trading News

Microsoft has been trying to climb, but one investor is worried it might roll over.

optionMONSTER's Depth Charge monitoring system detected the purchase of 10,000 January 27 puts for $1.05 and the sale of 30,000 January 16 puts for $0.11. The trade accounted for almost half today's volume in the software giant, which normally sees about 62,000 contracts in a single session.

Known as a ratio spread, the cost $0.72. It will earn a maximum profit of 1,428 percent if MSFT closes at $16 on expiration, with gains eroding below that level because of the larger position in the short puts. MSFT hasn't been under $16 since the first half of 2009.

Ratio spreads are designed to leverage moves of specific magnitude. They're often used as hedges by investors who own a stock and would be willing to buy more in the event of a significant decline. (See our Education section)

MSFT is up 0.87 percent to $30.97 in afternoon trading. It rallied from $26 to $32 in the first three months of the year but has been drifting lower since then. The company is scheduled to report its next earnings results after the bell on July 19.