$ARMK calls surge fourfold

Bullish option traders racked up big gains in Aramark (ARMK) amid takeover speculation today.

On May 8, Investitute’s tracking systems detected the purchase of 3,400 July $30 calls in one print for $1.45 with shares at $29.82. Open interest in the strike was 1,290 contracts before trade occurred, showing that this was a new position.

Those calls traded for as much as $6.50 today, about 4.5 times their purchase price. The stock rose 14.72% in the same time frame, underscoring how 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.

ARMK jumped 6.57% to $34.89 today. The stock spiked to $36.23 in midday trading as Reuters reported that investment firm Mantle Ridge may make a bid for the food company.