$MS call prices rocket higher

It took just one weekend for option traders to rack up fast gains on upside positions in Morgan Stanley (MS).

On Dec. 18, Market Rebellion’s Unusual Activity Service flagged the purchase of 2,150 Weekly $65 calls expiring on Dec. 31 for $0.86 as part of a bullish spread and roll with shares at $64.00. This was clearly fresh buying, as open interest in the strike was only 1,849 contracts before the activity appeared.

Those calls traded for as much as $3.70 today, more than 4 times their average purchase price. The stock rose 6.61% in the same time frame, illustrating the kind of leverage that can be achieved with options.
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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.

MS was up 5.69% to $67.83 this morning. The bank rose to a new 52-Week high this session after Federal Reserve released its second set of stress tests for the year and extending current restrictions on distributions, with modifications.