Pretium Resources soared on a bullish analyst report today, returning huge profits on upside option positions.
On Sept. 11, Investitute’s proprietary programs cited the purchase of 2,050 October $8 calls for $1.10 to $1.35 with shares at $9.07. These were clearly new positions, as open interest in the strike was only 257 contracts before the activity appeared.
This afternoon those calls sold for $4.10, more than 3 times their purchase prices. The stock rallied 34 percent in the same time period, a huge gain but one that was still far below that of its options.
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.
PVG rocketed 25.1 percent today to close at $12.11. Roth Capital raised its price target on the “significantly undervalued” stock to $17 from $16 this morning after the precious-metals miner announced gold production that far exceeded expectations.