$IBM calls buyers score big

IBM (IBM) has seen its shares climb since reporting earnings two weeks ago, and bullish option traders continue to reap profits.

On May. 31, Investitute’s market scanners found that 4,800 August $140 calls were purchased for $1.39 as part of a bullish roll with shares at $127.39. Open interest in the strike was only 479 contracts before the trade occurred, showing that this was a new position.

Those calls have traded for as much as $12.00 so far this morning, more than 8 times their purchase price. The stock has risen 19.2% in the same time period, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

IBM is currently up 3.02% to $152.72 today. Morgan Stanley resumed coverage of the computing icon this morning, with an Overweight weighting and $170 price target.