Option traders turned quick profits in Under Armour today.
Just yesterday, Investitute’s tracking systems detected the purchase of 4,738 February $13.50 calls for $0.90 as part of a bullish spread with shares at $13.30. This was clearly a new position, as open interest in the strike was only 920 contracts before the trade occurred.
Those calls traded up to $2.10 today, nearly 2.5 times their purchase price. The stock rose 17.6% 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.
UA surged 16.01% to $15.29 today. The struggling athletic-apparel retailer surpassed revenue projections this morning.