$JBLU call buyers are flying high

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Airlines have come back with a vengeance in this month, and bullish traders are posting big gains in JetBlue Airways today.

On Oct. 3, Investitute’s tracking systems detected the purchase of 3,600 November $20 calls for $0.35 to $0.64 with shares at $19.27. These were clearly new positions, as open interest in the strike was only 296 contracts before the trades occurred. Investitute co-founder Jon Najarian cited the unusual activity on CNBC’s “Halftime Report” that afternoon.

Those calls traded for $1.14 today, more than triple their original purchase price. The stock was up 5.6 percent at the same time, showing how quickly options can far outpace gains in 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.

JBLU jumped 3.8 percent to $20.23 today. The carrier has been rebounding along with other airlines, which had been beaten down for months.

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Mike Yamamoto

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