$LOW call prices skyrocket tenfold | Investitute

$LOW call prices skyrocket tenfold

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Lowe’s spiked higher late this afternoon, yield enormous profits for option traders.

On Dec. 28, Investitute’s tracking systems detected the purchase of 4,900 January $95 calls for $0.75 to $0.80 with shares at $92.35. This represented fresh buying, as volume was more than double the strike’s open interest of 2,185 contracts. Investitute co-founder Pete Najarian cited unusual option activity in Lowe’s while naming it as his final trade on CNBC’s “Fast Money” program Tuesday night.

The January calls traded up to $7.75 today, more than 10 times their original purchase price. The stock rose 9.2 percent in the same time frame, showing how quickly options can far 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.

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.

LOW jumped 5.35 percent to $100.86 today. The home-improvement chain spiked higher in the last 90 minutes of trading after reports that activist investor D.E. Shaw has taken a stake in the company.

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Mike Yamamoto

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