$MSFT bulls score big profits

Bullish option traders have been rewarded with big profits on upside positions in Microsoft (MSFT) today.

On Mar. 24, Market Rebellion’s Unusual Activity scanners identified the purchase of 11,000 Weekly $160 calls expiring on Apr. 3 for $0.78 to $2.28 with shares at $144.57. This was clearly a new position, as volume was well above the strike’s previous open interest of 1,670 contracts.

Market Rebellion co-founder Jon Najarian noted the activity at the time in the Unusual Option Activity chat room.

Those calls traded for as much as $4.80 today, at least double their purchase prices. The stock rose 11.09% in the same time frame, showing how options can far outperform their underlying shares on a relative basis.

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 closed 7.03% higher today at $160.23. The software giant rose sharply today after the company detailed in a blog post yesterday a 775% surge in the usage of its cloud services in regions where people have “sheltered in place.”