Call buyers turn quick profit in Microsoft

Traders who opened short-term bullish positions on Microsoft earlier this week can already cash in with a substantial profit.

On Tuesday, Investitute’s proprietary scanners found that 5,600 Weekly $66 calls expiring on April 28 were purchased for $0.94 to $1.15 while the stock traded around $65.34. Volume was well above the strike’s open interest of 3,720 contracts at the beginning of the day, indicating that these are new positions.

Those calls are now trading for $1.57 to $1.72, a gain of at least 60 percent in less than four sessions. Microsoft’s shares have advanced just 1.62 percent in that same time, underscoring the strength of leverage that can be achieved through options.

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 was up 1.37 percent today to finish at $66.40, an all-time closing high. The software giant pulled back after its last quarterly results on Jan. 26 but has been drifting slowly higher since early February.

Its next earnings report will be released after the close next Thursday, April 27–the afternoon before the Weekly calls expire–but traders who purchased those contracts can already book profits if they so choose.

Disclosure: I own MSFT shares.