Call prices take flight in $AAL

Bullish option trades in American Airlines have taken flight as oil prices have fallen.

On Oct. 19, Investitute’s market scanners found that 5,000 November $34 calls were purchased from $1.07 to $1.10 with shares at $32.45. Open interest in the strike was only 2,829 contracts before that session began, showing that this was fresh buying.

Those calls sold for $4.37 this morning, more than 4 times times their initial purchase price. The stock rose 18.18% at the same time, underscoring how quickly options can far outpace moves in 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.

AAL touched an intraday high of $38.59 in early trade today before pulling back and settling at $38.11, or an 0.87% gain on the day. The historical drop in the price of crude oil has sent shares of the airliner higher since bottoming on Oct. 24.