$ADM call buyers rack up profits

Bullish option traders have more than doubled their money in Archer Daniels Midland.

On Dec. 26, Investitute’s proprietary programs flagged the purchase of 2,500 January $42 calls for $0.46 as part of a bullish spread with shares at $39.65. This was clearly a new position, as volume was well above the strike’s previous open interest of 1,064 contracts.

Those calls traded for $1.11 this afternoon, about 2.5 times their purchase price. The stock rose 7.36% in the same time frame, 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.

ADM was up 1.86% to $42.70 today. The agriculture company has rebounded amid recent optimism on U.S.-China trade negotiations.