$MSFT option bulls triple money at highs

Bullish option traders are being rewarded today with big profits on upside positions in Microsoft (MSFT) as it sets a new record high.

On Apr. 5, Market Rebellion’s UOA service identified the purchase of 8,000 April $252.50 calls for $0.95 to $2.01 with shares at $243.80. This was clearly a new position, as volume was clearly above the strike’s previous open interest of 1,648 contracts.

Those calls traded for as much as $7.00 during this session, at least triple their purchase prices. The stock rose 6.29% in the same time frame, showing how options can far outperform their underlying shares on a relative basis.

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 at the close was at $258.49, up 1.01% on the session just below its new all-time-high of $259.19 made earlier. The software giant is scheduled to report earnings on Apr. 27 after the close.