$TXT bulls quintuple their money | Investitute

$TXT bulls quintuple their money

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Option traders posted exponential gains in Textron today.

Way back on July 25, Investitute’s market scanners identified the purchase of 7,100 January $55 calls for $1.12 to $1.20 with shares at $49.25. These were clearly new positions, as volume was well above the strike’s open interest of 4,049 contracts. Investitute co-founder Jon Najarian also cited buying in February calls on CNBC’s “Halftime Report” last Friday.

The January calls ended today’s session trading for $5.15, more than 5.5 times their original purchase price. The stock rose 22.1 percent in the same time, a large move but nowhere near that of its options on a relative basis.

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.

TXT was up 1.79 percent today to close at $60.15. The aircraft manufacturer has rallied amid rising geopolitical tensions and prospects for infrastructure contracts.

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Mike Yamamoto

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