Mall operator GGP surged after an unsolicited takeover bid today, returning exponential profits on upside option positions opened just last Tuesday.
On Nov. 7, Investitute’s market scanners identified the purchase of 4,700 November $20 calls for $0.16 to $1.05 with shares at $20.31. These were clearly new positions, as open interest in the strike was only 490 contracts before the trades occurred.
Those calls sold for $3.80 this morning, more than 23 times their original purchase price. The stock rose 17.1 percent in the same time frame, illustrating the kind of leverage that can be achieved through options.
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.
GGP jumped 8.33 percent to $24.05 today. Bermuda-based Brookfield Property Partners announced plans to pay $14.8 billion to acquire the 66 percent portion of the real-estate investment trust that it doesn’t already own.