$ADNT calls prices triple

Option traders have more than tripled their money on upside positions in Adient.

On April 4, Investitute’s market scanners cited the purchase of 2,000 May $16 calls for $1.55, as part of a complex bullish spread, with shares at $15.77. This was clearly a new position as the trade was well above the previous open interest of 177 contracts. Investitute co-founder Jon Najarian cited the unusual call buying at that time on CNBC’s “Halftime Report” by making the stock his final trade.

Those calls traded for as much as $5.50 this morning, 3.5 times their initial purchase price. The stock rose 32.91% in the same time frame, underscoring how options can far outperform 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.

ADNT spiked 13.65% to close at $20.73 today. The manufacturer of seating for the automotive industry rallied after Bank of America Merrill Lynch analyst John Murphy raised the name to a Buy from Neutral and upped his price target to $25 from $19.