MSFT – Microsoft Corp. – Shares of the software company are currently higher by about 3% to $25.53, but options activity on the stock suggests investors are bracing for bearish movement in the price of the underlying through expiration in September. Traders may be feeling a bit nervous ahead of MSFT’s fourth-quarter earnings report, as the firm is expected to reveal that earnings declined to 36 cents from 46 cents in the same period last year. Investors acted on fears of potential declines in the stock by selling approximately 10,000 calls short at the September 26 strike price for a premium of 85 cents apiece in order to finance the purchase of some 10,000 puts at the September 25 strike for 1.11 per contract. The net cost of getting long protective put options amounts to 26 cents. Traders will begin to amass profits, or protect long positions in the underlying, if shares slip beneath the breakeven point to the downside at $24.74.

CMCSK – Comcast Corp. – The provider of entertainment announced that it will be the first cable provider to offer full HBO On Demand service in high definition (HD) to its customers. Shares of CMCSK have rallied approximately 1% to $13.70 during today’s trading session. Comcast appeared on our ‘hot by options volume’ market scanner after option traders took bullish stances on the firm in the near-term August contract. Hoping for continued upward movement in the stock, investors purchase about 8,900 calls at the August 15 strike price for an average premium of 22 cents apiece. In order for these individuals to amass profits by expiration, shares would need to surge at least 11% to surpass the breakeven point at $15.22. Option implied volatility edged slightly higher to 41% this afternoon from the opening reading of 38%.

HIG – The Hartford Financial Services Group, Inc. – Frenzied call-buying by bullish option traders was apparent on the insurance and financial services firm today, amid a share price rally of more than 14% to $14.03. Call options were traded five times to each put option in action on the stock, as evidenced by the call-to-put ratio of more than 5-to-1. The near-term August 14 strike had about 5,200 in-the-money calls picked up for an average premium of 73 cents apiece. We note that now the same in-the-money calls tote an asking price of 1.25 each. The higher August 15 strike price attracted bullish traders who bought 8,600 calls for about 42 cents per contract. Further, the most optimistic individuals purchased 1,600 calls at the August 16 strike for 32 cents each. Shares of HIG would need to surge 16% higher for investors long the August 16 strike calls to begin to profit above the breakeven price of $16.32. Finally, other traders picked up 1,800 put options at the August 13 strike for 92 cents each, perhaps in an attempt to lock in gains enjoyed during the rally.

PNC – PNC Financial Services Group, Inc. – The banking and financial services firm has been left out of today’s market rally, its shares currently down nearly 4% to $36.04. PNC’s second-quarter earnings failed to meet analyst expectations. The company revealed that profits tumbled 61% as an increasing number of borrowers fell behind on loans. The EPS of 14 cents for the quarter pales in comparison to the 1.45 earned by PNC just one year prior. Options bears roared, clawing at put options in the November contract. It appears one investor initiated a ratio put spread in an attempt to profit to the downside. The just out-of-the-money November 36 strike price had 20,000 puts purchased for an average premium of 4.08 apiece spread against the sale of 40,000 puts at the lower November 31 strike for 1.97 a-pop. The net cost of the transaction amounts to just 14 cents and yields maximum potential profits of 4.86 if the stock declines to $31.00 by expiration. Shares need only fall by another 18 cents for this PNC-pessimist to begin to garner profits at the breakeven price of $35.86. We note additional fresh put-option action at the November 29 strike where 10,000 lots traded to the middle of the market for 1.45, as well as at the November 27.5 strike where 15,000 puts exchanged hands.