Morgan Stanley Bulls Look for Encore

By Pete Najarian, co-founder of OptionMonster

NEW YORK (OptionMonster) -- Morgan Stanley (MS) has surged in recent weeks, and traders are looking for an encore.

OptionMonster's tracking systems detected early buying in the May 24 calls for 57 cents and selling in the April 20 calls for $1.77. It appears that they had earned profits in the April contracts and swapped them out for the May options.

The trade lets them take some money off the table while keeping their position for another month in case the stock makes a big move during that time.

Long calls lock in how much investors must pay to buy a stock. That gives them major leverage to the share price, letting them double or triple their money from even a small move.

One problem that doesn't exist with stock, however, is that options expire. So we often see rolls like Tuesday's as investors look to extend the duration of their positions.

Morgan Stanley's stock fell 1.22% to $20.26 Tuesday but is up 34% year to date. The company got a boost on Jan. 19 after reporting strong earnings and revenue.

More than 60,000 option contracts traded in the name Tuesday. Of those, almost 45,000 were calls, a reflection of the bullish sentiment.

Najarian owns MS shares.

>To order reprints of this article, click here: Reprints