I bought Microsoft April 27.50 calls for 1.75/contract on 10/2. The stock was trading at $27.35 a share. Intrinsic value was zero, time premium was 1.75 for 6 months. Microsoft has traded in a range for years without any really significant catalysts. Their earnings continue to be strong, their position in the industry is still very strong, and they have some huge catalysts on the horizon with Vista, Zune, and continued sales/improvements on the xbox360. Purchasing equivalent amounts of the stock would have cost a considerable amount of money and the calls seemed like a long enough period to maximize the gain on the hype and initial sales of Vista, both of which I think will be strong.
For all the negative press Microsoft gets for security concerns, monopolistic practices, and poor quality software, I think they do an exceptional job at providing a great OS for corporate desktops and consumers. They have a lot of very talented employees, behave fiscally responsibly, and are mature enough in the industry to be able to continue to dominate in their areas of strength.
I also believe the hype/threat of Linux on the desktop has waned. While many technically savvy people have dabbled in running Linux on their desktop, the vast majority of home and corporate desktop users continue to use Windows. I think having competition in the market is healthy and will force Microsoft to remain competitive, but I think, when it really comes down to it, most consumers and corporate customers will stick with Windows for the forseeable future.
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