Strong quarterly results in Tyson Foods translated into big gains for upside option traders today.
On June 1, Investitute’s tracking systems detected the purchase of 2,500 October $60 calls for $2.50 to $2.55 with shares at $58. This was clearly fresh buying, as open interest in the strike was just 335 contracts before that session began.
Today those calls sold for $7.60 today, turning an average profit of more than 200 percent. The stock rose 15.8 percent in the same time frame, illustrating how far options can outperform their underlying shares.
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.
TSN was up 5.69 percent today to close at $66.90. The meat producer beat quarterly estimates on the top and bottom lines before the market opened.