$CRON calls spike overnight

Option traders are posting large profits today on bullish positions opened in Cronos (CRON) only one session earlier.

Just yesterday, our tracking systems detected the purchase of 5,000 January $7.50 calls for $1.24 to $1.29 as part of a bullish roll above open interest of 2,231 contracts with shares at $8.03. This was clearly a new position, as volume was far above the strike’s previous open interest of 2,231 contracts. Market Rebellion co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $3.30 today, more than 2.5 times their purchase prices. The stock rose 31.38% at the same time, a big move but 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.

CRON is up 4.17% to 8.75 this morning. The reason for the rally is not immediately clear, but yesterday the medical-marijuana company announced that its initial public offering on the Australian market.