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What's behind call action in Microsoft

Chris McKhann (

A huge call spread dominates today's option activity in Microsoft this morning as shares remain near 2012 lows.

MSFT is down fractionally today at $26.56, just above the close of $26.52 from two weeks ago, which was the lowest since the last day of 2011. Shares did climb up to levels just shy of $33 by mid-March but have been generally trending lower since.

One trade in the April calls makes most of the market so far, according to optionMONSTER's scanners. A trader bought 34,500 April 29 calls for the ask price of $0.58 against open interest of almost 50,000. At the same time, he or she sold 20,100 April 27 calls for the bid price of $1.25 with open interest at fewer than 4,000 at that strike, so this is a new position.

The trade could be an odd roll-down of a short-call position from the higher to the lower strike and reducing the position size as the stock moves lower. It could also be a backspread , which would be looking for the MSFT to move back above $29 in coming months but hedging against the possibility that it remains below $27. (See our Education section)

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