$MSFT breaks out, calls double

Microsoft continued its recent rally to new highs today, returning handsome profits to bullish option positions opened two months ago.

On May 14, Investitute’s tracking systems detected the purchase of 8,492 July $97.50 calls for $4.15 as part of a bullish roll with shares at $98.37. This was clearly a new position, as open interest in the strike before the trade occurred was only 8,271 contracts.

Those calls sold for $9.03 today, more than twice their purchase price. The stock rose 8.2% in the same time period, illustrating how options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

MSFT was up 1.02% today to close at $105.98 after reaching a lifetime high of $106.50 this afternoon. The technology behemoth today saw an increased price target by BofA/Merrill, along with news breaking this morning that Walmart has selected Microsoft’s Azure platform to provide cloud services.