Microsoft Corp. (NASDAQ:MSFT) – Options traders littered the software company with long term bullish transactions with shares of the underlying stock trading 1.20% higher at $25.09 with 40 minutes remaining before the closing bell. It appears one investor initiated a lopsided bullish call butterfly spread in the January 2011 contract to position for significantly higher MSFT shares by expiration. The optimistic individual picked up 6,000 calls at the January 2011 $26 strike for a premium of $1.94 each [wing 1] and purchased another 6,000 calls at the higher January 2011 $35 strike for an average premium of $0.15 apiece [wing 2]. Finally, the trader sold 12,000 calls at the January 2011 $30 strike to receive a premium of $0.66 a-pop [body]. The net cost of the butterfly spread amounts to $0.77 per contract. Therefore, the responsible party is prepared to make money as long as Microsoft’s shares rally 6.7% over the current price of $25.09 to surpass the effective breakeven point to the upside at $26.77 by expiration day. Maximum potential profits of $3.23 per contract accumulate for the trader should MSFT’s shares surge 19.5% to $30.00 by January 2011 expiration. The investor loses the $0.77 premium paid for the transaction if shares fail to rally above $26.00. And, in most butterfly spreads this amount would represent maximum loss potential. But, in this case, the trader could lose up to a maximum of $1.77 per contract if Microsoft’s shares rally above $35.00 because of the greater distance of the upper strike price selected in the transaction. [We note that the spread is ‘lopsided' because typically the wings of a butterfly are equidistant. However, in this case the wings are different lengths because there is no January 2011 $34 strike available, so the investor utilized the next closest, or January 2011 $35 strike price.] The investor starts to lose money above and beyond the $0.77 in premium paid for the trade if shares of the underlying stock rally above $34.00 ahead of expiration day. Other bullish investors enacted plain-vanilla debit call spreads in the longer-dated January 2012 contract. Optimists purchased a total of 7,000 calls at the January 2012 $32.5 strike for roughly 1.34 each, and sold the same number of calls at the higher January 2012 $37.5 strike for approximately $0.54 in premium per contract. The spread cost investors an average net premium of $0.80 per contract. Investors long the spread are prepared to amass maximum potential profits of $4.20 per contract in the event that MSFT’s shares surge a whopping 49.45% to $37.50 by January 2012 expiration.

Qualcomm, Inc. (NASDAQ:QCOM) – The provider of digital wireless telecommunications products and services enticed bullish options investors in afternoon trading. Qualcomm’s shares increased 0.85% to $35.02 by 3:55 pm (ET), but rallied as much as 1.3% to an intraday high of $35.17 at the start of the trading session. Investors piled into out-of-the-money call options in the last 30 minutes of the trading session, buying approximately 38,000 lots at the June $36 strike for an average premium of $0.28 apiece. Call buyers at this strike price are prepared to make money should Qualcomm’s shares rise another 3.7% to exceed the average breakeven price of $36.28 ahead of June expiration. Bulls also purchased some 8,400 now in-the-money calls at the July $35 strike for an average premium of $1.18 apiece. These traders are poised to profit as long as shares trade above the average breakeven point on the calls at $36.18 by expiration day in July.

Walgreen Co. (NYSE:WAG) – Shares of the largest drugstore chain in the U.S. fell 2.35% to $29.13 today after Barclays cut WAG’s 2011 earnings estimate to $2.05 from $2.55 following CVS Caremark Corp.’s decision to speed up Walgreen’s exit from its retail pharmacy network. Additionally, Barclays reduced their share price estimate on WAG to $27.00 from $36.00. Bearish options investors burst right out of the gate this morning to populate Walgreen with pessimism. One investor enacted a bearish risk reversal, while other traders purchased plain-vanilla puts in the June contract. Put buyers picked up approximately 1,900 contracts at the June $29 strike for an average premium of $0.71 apiece. Investors long the puts make money if Walgreen’s shares decline another 2.9% to breach the average breakeven point to the downside at $28.29 by June expiration day. The risk reversal strategist appears to have sold 1,500 calls at the June $30 strike for a premium of $0.24 each in order to partially finance the purchase of the same number of puts at the lower June $28 strike for an average premium of $0.41 apiece. Net premium paid for the transaction amounts to $0.17 per contract. Thus, the investor responsible for the trade is prepared to profit should shares of the underlying stock fall another 4.5% from the current price of $29.13 to trade beneath the effective breakeven price of $27.83 by expiration.

Harley-Davidson, Inc. (NYSE:HOG) – Motorcycle maker, Harley-Davidson, Inc., attracted hoards of options investors during the session with its shares rallying as much as 5.85% in morning trading to secure an intraday high of $27.71. Harley’s shares are currently up a more modest 1.80% to $26.65 just before 12:40 pm (ET). Bullish tactics dominated activity in the June contract, with optimistic traders picking up some 4,300 calls at the June $28 strike for an average premium of $0.52 apiece. Call buyers at this strike price make money only if Harley-Davidson’s shares exceed $28.52 ahead of June expiration. Optimism spread to the higher June $30 strike where 1,100 calls were purchased at an average premium of $0.15 each. The calls are not a profitable acquisition for traders unless Harley’s shares jump more than 13.1% over the current price of $26.65 to exceed the average breakeven price of $30.15 by June expiration day. Investor sentiment is mixed in the July contract. While bulls purchased call options at the July $30 strike for an average premium of $0.82 apiece, bearish traders employed different strategies. It looks like some pessimistic investors essentially opted to sell call options in order to finance the purchase of debit put spreads. These traders appear to have purchased roughly 4,000 puts at the July $25 strike for an average premium of $1.23 each, and sold about the same number of puts at the lower July $20 strike for $0.23 apiece. Additional financing for the bearish spread was provided by the sale of approximately 4,000 calls at the July $30 strike for an average premium of $0.82 each. Thus, the average net cost of the combination play amounts to $0.18 per contract. Investors employing this strategy are prepared to profit should HOG’s shares decline 6.9% to breach the effective breakeven price to the downside at $24.82 by July expiration. Maximum available profits of $4.82 per contract accumulate for bearish individuals if shares of the underlying stock plummet 24.95% from the current price of $26.65 to break through $20.00 by expiration day.

Saks, Inc. (NYSE:SKS) – Some investors made bullish moves on Saks, Inc. today with shares of the underlying stock up as much as 5.2% in the first half of the trading session to an intraday high of $8.50. The luxury retailer’s share price rose on optimism consumer spending continues to improve, although shares are up a lesser 3.10% to $8.33 as of 12:15 pm (ET). Options investors expecting shares to continue to improve purchased 3,000 calls at the July $10 strike for an average premium of $0.15 per contract. Call buyers at this strike price are prepared to make money as long as Saks’ shares surge 21.85% over the current price of $8.33 to surpass the average breakeven price of $10.15 by July expiration. The bullish bets in the July contract contrast with activity observed in the January 2011 contract where it looks like one investor expects the stock to cool and settle at $7.50 apiece by expiration. It appears the trade sold a straddle, shedding 3,600 calls at the January 2011 $7.5 strike for a premium of $1.95 each in combination with the sale of 3,600 puts at the same strike price for a premium of $1.05 apiece. Gross premium pocketed by the straddle seller amounts to $3.00 per contract. The investor keeps the full premium received only if shares of the underlying stock decline 10% to settle at $7.50 at expiration. The short position taken in both call and put options expose the responsible party to losses in the event that Saks’ shares rally above the upper breakeven price of $10.50, or if shares slip beneath the lower breakeven point at $4.50, ahead of January 2011 expiration day.

Allscripts-Misys Healthcare Solutions, Inc. (NASDAQ:MDRX) – The provider of clinical software, services, information and connectivity solutions to physicians and other health care providers received conflicting ratings by opposite-minded analysts today. MDRX was raised to ‘outperform’ from ‘market perform’ with a 12-month target share price of $22.00 at Raymond James, but was downgraded to ‘equal-weight’ from ‘overweight’ at First Analysis. Shares of the underlying stock are currently up 3.19% to $17.17 as of 1:15 pm (ET). Traders populating MDRX options today cast pessimism on the stock by selling nearly 2,000 calls at the July $17.5 strike for an average premium of $0.68 per contract. Investors short the calls keep the full $0.68 per contract received on the transaction as long as MDRX’s shares trade below $17.50 through July expiration. Potentially devastating losses accumulate for call sellers if they do not currently hold an equivalent number of shares of the underlying stock and MDRX shares rally above the upper breakeven price of $18.18 by expiration day next month. Options implied volatility on the stock is down 9.2% to 40.81% in early-afternoon trading.

Discover Financial Services (NYSE:DFS) – Bulls bombarded Discover Financial Services’ options today with shares of the credit card issuer and electronic payments services firm up 6.75% to $13.42 just before 12:30 pm (ET). Call buyers on the scene picked up 1,400 now in-the-money contracts at the June $13 strike for an average premium of $0.46 apiece. Investors long the calls are positioned to profit should shares of the underlying stock exceed the average breakeven point to the upside at $13.46 by expiration day. Traders acting early enough to secure the $0.46 asking price on the June $13 strike calls should be pleased given the subsequent jump in premium on the same options this afternoon, which now tote an asking price of $0.80 each. Other bullish traders picked up 1,000 calls at the higher July $15 strike for an average premium of $0.20 per contract. Investors holding the July $15 strike call options make money only if Discover Financial Services’ share price jumps 13.25% to surpass the effective breakeven price of $15.20 ahead of July expiration.

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