Call buyers score big in $ADP

Option traders have racked up large gains on bullish positions in ADP

On Jan. 15, Investitute’s market scanners flagged the purchase of 2,000 February $135 calls for $3.60 to $3.70 with shares at $133.08. This was clearly a new position, as open interest in the strike was only 887 contracts before the trade occurred.

Those calls sold for $8.70 today, more than twice their purchase prices. The stock rose 7.68% 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.

ADP was up 1.42% tp $143.63 today. The human-resources and payroll outsourcing company surpassed earnings and revenue estimates on Jan. 30.