Bullish option trades in General Cable spiked higher on takeover news today.
On Aug. 25, Investitute’s tracking systems detected the purchase of 4,100 November $19 calls for $0.70 to $0.95 with shares at $17.10. These were clearly new positions, as open interest in the strike was only 204 contracts before the trades occurred.
Those calls were marked at $2.98 today, more than 4 times their original purchase price. The stock rallied 22.8 percent in the same time period, an impressive move but one that was still far below that of its 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.
BGC jumped 5.26 percent to close at $21 today. Shares rose after Reuters reported that the cable manufacturer had received tentative buyout offers from at least three European companies.