Bulls score big gains in $EBAY

Option traders quadrupled their money after eBay got a rare double-upgrade from Morgan Stanley today.

On April 12, Investitute’s market scanners identified the purchase of 2,200 April $40.50 calls for $0.57 to $0.82 with shares at $40.76. Open interest was above the strike’s open interest of 1,780 contracts, indicating that this was fresh buying.

Those calls traded for $2.44 today, more than 4 times their initial purchase price. The stock rose 5% in the same time frame, showing how quickly 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.

EBAY was up 2.81% today to close at $41.75. Morgan Stanley upgraded the online-auction giant two notches to “overweight” from “underweight” and raised its price target to $58 from $36 today, citing the company’s partnership with payment service Adyen.