Traders who bought Microsoft calls this morning were already racking up sizable gains by the afternoon.
Barely 10 minutes after the opening bell, Investitute’s proprietary market scanners showed that 9,000 Weekly $68.50 calls expiring on May 12 were purchased mostly for $0.70 to $0.75 with shares at $68.45. This was clearly fresh buying, as the volume was well above the strike’s open interest of 3,610 contracts.
Those calls last traded for $1.27, a gain of 75 percent in just one session. The stock closed at $69.41, up 1.39 percent on the day–a contrast that underscores the kind of leverage that can be achieved through options.
Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning shares.
(Disclosure: I am long MSFT.)