By Mike Yamamoto of OptionMonster
NEW YORK -- Morgan Stanley (MS) hit a five-year high on Monday, and traders are betting on more gains by the end of next week.
About 2,300 September 35.50 calls were bought for 17 cents to 25 cents, according to OptionMonster's tracking systems. Open interest in the strike was just 244 contracts before the day began, indicating that new positions were established.
These long calls lock in the price where the stock can be purchased in the next nine sessions no matter how far it might climb. They could be sold before that expiration date at a profit if premiums rise with a rally earlier, providing potentially significant leverage, but the contracts will quickly lose value if shares stall or pull back.
Morgan Stanley's stock rose 0.66% on Monday to close at $34.86. The financial firm climbed to $35.08 in the morning, its highest intraday price since October 2009.
Monday's total option volume in the name was 45% higher than its daily average for the last month. Overall calls outpaced puts by 3 to 1.
Yamamoto owns MS bonds.