Bulls double money in $CMCSA

Comcast rallied today as M&A picked up in the media space.

On May 30, Investitute’s proprietary programs showed that 10,200 $35 calls expiring on Oct. 19 were purchased for $0.86 to $0.91 with shares around $31.49. These were clearly new positions, as volume well above the strike’s existing open interest of 9,693 contracts. Investitute co-founder Jon Najarian cited the unusual call buying in the name that day on CNBC’s “Halftime Report.”

The investors were likely betting that the AT&T-Time Warner merger would be approved by a federal judge, thereby easing the way for other deals in the industry–in this case, Comcast (CMCSA) and Twenty-First Century Fox (FOX/FOXA).

New buyers of those October $35 calls paid as much as $1.78 today, double their original purchase price. The stock rose 7.8% in the same time frame, a large move but still 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.

Comcast was up 4.7% to close at $33.82 today. Just hours after the approval of the AT&T-Time Warner merger last night, Comcast offered a $65 billion bid to acquire Twenty-First Century Fox at a 19% premium over Disney’s current offer for the same assets.