Norwegian Cruise Line surged as it joined the S&P 500 today, handing huge gains to bullish option traders.
On Sept. 28, Investitute’s market scanners detected the purchase of 3,300 October $52.50 calls for $1.55 to $1.85 with shares at $52.93. These were clearly new positions, as open interest in the strike was just 260 contracts before the trades took place.
Today those calls sold for $6.40, more than 4 times their original purchase price. The stock rose 11.1 percent in the same time, showing how options can far outperform their underlying shares.
Long calls lock in the price where a 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 the shares themselves.
NCLH was up 0.74 percent to $58.84 today. The cruise-line operator gapped back above its 50-day moving average with its inclusion in the benchmark SPX index.