$MSFT calls turn quick profits

It took just three sessions for bullish option traders to more than double their money in Microsoft (MSFT).

On Oct. 24, Market Rebellion’s activity scanners identified the purchase of 4,000 November $139 calls for $3.10 as part of a bullish spread with shares at $139.47. This was clearly a new position, as volume was well above the strike’s previous open interest of 1,865 contracts.

Those calls have traded for as much as $7.32 today, about 2.5 times their purchase price. The stock 4.43% in the same time frame, showing how quickly 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.

MSFT is up 2.57% to $14.35 this morning. The software giant rallied in the post-market Friday on news that the Defense Department had awarded the company a $10 billion cloud contract.