$BX calls rack up big gains

Option traders who placed long-term bullish bets on Blackstone at the end of last year are already cashing in major profits.

Back on Dec. 11, Investitute’s market scanners found that 31,100 January 2021 $40 calls were bought for $2.35 with shares at $31.40. Open interest in the strike was only 472 contracts before that session began, showing that this was fresh buying. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $4.50 this afternoon, about twice their purchase price. The stock rallied 29.52% in the same time period, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

BX reached $41 this afternoon, its highest price since 2015, before pulling back to close lower by 0.07% at $40.62. The asset manager is up sharply since announcing on April 18 that it will convert to a corporation from a partnership.