$AAL calls take off overnight

Option traders who opened bullish positions in American Airlines yesterday are already reaping exponential profits.

Just yesterday, Investitute’s proprietary programs found that 6,500 Weekly $33.50 calls expiring on April 5 were bought for $0.11 and $0.12 with shares at $31.78. This was clearly a new position, as open interest in the strike was only 373 before the trade occurred.

Those calls traded for as much as $0.45 this morning, about 4 times their purchase prices. The stock rose 4.97% at the same time, showing how quickly options can far outpace gains in their underlying shares 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.

AAL was up 1.98% to $32.99. The carrier rallied along with other airlines after rival Delta raised its earnings and revenue outlook this morning.