$MSFT bulls make fast profits

Bullish option traders have been rewarded on upside positions in Microsoft (MSFT).

Earlier this week on Jan. 8, Market Rebellion’s Unusual Activity scanners identified the purchase of 11,700 Weekly $160 calls expiring today for $0.35 to $0.57 with shares at $159.31. These were clearly new positions, as volume was above the strike’s previous open interest of 9,859 contracts.

Those calls have traded for as much as $3.20 today, at least 5 times their purchase price. The stock rose 2.4% in the same time frame, showing how options can far outperform their underlying shares on  relative basis.

It is the second winning trade in the name to be posted on Market Rebellion this month.

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.

MSFT is nearly unchanged on the day, currently at $162.15, after making a new all-time-high of $163.22 earlier this session. The software giant’s price target was raised by Jefferies yesterday, to $185 from $160.