Microsoft Calls Trade Briskly as Investors Bet on Stock's Resurgence
NEW YORK -- It is the world's largest software company and accounts for 10% of the Nasdaq 100 Index, but Microsoft has been overlooked by the recent rally.</br></br>The stock is basically flat for the year, compared with a 26% jump for the Nasdaq 100 and 15% rise for the Standard & Poor's 500-stock index. That lag has caught the attention of options traders and strategists, some of whom are seeking ways to position for a possible rebound of the software company relative to the broad market.</br></br>Neil Herman, Lehman Brothers' software analyst, said he believes the Redmond, Wash., company is well positioned for the coming quarter. Although summer can be a slow season for software revenue, Microsoft remains a good defensive play, he said in a research note; after all, it isn't clear if technology spending will pick up to the extent many investors had hoped as they loaded up on more volatile tech stocks.</br></br>Other strategists pointed out how Microsoft has underperformed compared with sectors such as biotechnology and semiconductors and could catch up if investors believed these other sectors were becoming overbought.</br></br>Meanwhile, implied volatility of three-month options on Microsoft is a bit below average levels during the past year, making its calls relatively inexpensive, Lehman options strategist James Hosker said.