$MS call buyers bank quick gains

It took just two sessions for option traders to double their money in Morgan Stanley.

On Monday, Investitute’s tracking systems detected the purchase of 10,000 August $50 calls for $0.87 as part of a bullish spread with shares at $48.88. This was clearly a new position, as volume was far above the strike’s open interest of 4,793 contracts.

Those calls traded for $1.85 this morning, more than twice their purchase price. The stock rose 4.71% in the same time frame, showing how quickly options can far outpace gains in 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.

MS was up 2.81% to $50.56 today. The bank topped quarterly estimates and announced a $4.7B stock-buyback program this morning.