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Strategist: Buy call options on these cheap stocks

A Jet Blue aircraft takes off from Long Beach Airport in Long Beach, CA.
Tim Rue | Bloomberg | Getty Images
A Jet Blue aircraft takes off from Long Beach Airport in Long Beach, CA.

As the market hovers near a record, MKM Partners' derivatives strategist identified a select group of stocks where call options are "cheap," providing a cost-effective way for investors to ride the next leg higher of the bull run.

"Our sense is that investors want to increase net long exposure to participate along with further potential upside but lack conviction about where to deploy capital," wrote Jim Strugger, derivatives strategist at MKM Partners.

Call options give investors the right to buy a stock at a specified price within a specific period of time, profiting when the underlying asset increases in value.

But there is risk. While these contracts cost less than a share of the underlying stock, they can lose their whole value if the market turns against you.

MKM ran a screen of stocks with strong positive momentum and various levels of implied volatility, a metric used in the options market to estimate the potential move of a security.

From that list, CNBC Pro found the stocks that have the highest projected upside from Wall Street analysts and the cheapest call options contracts based on that implied volatility.