$MS calls prices jump 3-fold

Bullish option trades opened ahead of Morgan Stanley’s quarterly results have yielded exponential gains.

Investitute’s tracking systems detected bullish activity in the anem on two consecutive sessions last month:

–On March 27, 9,000 July $44 calls were bought for $1.40 to $1.45 above open interest of 1,802 contracts with shares at $41.72.
–On March 28, 8,000 July $44 calls were purchased at the same time for $1.47 below open interest of 13,265 contracts but adding to the previous volume with shares at $41.77.

Investitute co-founder Pete Najarian cited the unusual activity at that time in choosing Morgan Stanley for his final trade on CNBC’s “Halftime Report.”

Those calls traded for as much as $4.25 today, more than 3 times their initial purchase price. The stock rose 13.42% in the same time period, showing how 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.

MS ended today’s session off 0.55% to $47.29. The investment bank beat earnings and revenue estimates on April 17.