$APC bulls hit a gusher again

Anadarko Petroleum soared on buyout news again today, producing exponential profits for upside option positions.

On April 18, Investitute’s tracking systems detected the purchase of 10,000 Weekly $67 calls expiring this Friday for $0.32 to $0.47 as part of a bullish spread with shares at $64.29. This was clearly fresh buying, as there was no open interest in the contract before that session began.

Those calls traded up to $4.94 today, 12.5 times their average purchase price. The stock surged 11.88% in the same time period, a huge move but still nowhere near that of its options on a relative basis. Investitute co-founder Jon Najarian highlighted the work of Investitute’s market scanners and proprietary algorithm in both these calls, and Occidental puts, in an article published earlier this morning.

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.

APC spiked higher by 11.37% to close at $71.41 today. The oil and gas producer rose again on deal news that Occidental Petroleum (OXY) would pay $57 billion in cash and stock to acquire the company, a premium to Chevron’s (CVX) April 12 announcement that it would buy Anadarko for $33 billion.