$ADP keeps paying off for calls

Bullish option traders logged large gains in Automatic Data Processing today.

On Dec. 18, Investitute’s proprietary programs flagged the purchase of 2,500 February $130 calls for $7.73 as part of a bullish spread with shares at $130.97. This was clearly a position, as open interest in the strike was a mere 36 contracts before that session began.

Those calls traded for as much as $19.30 today, 2.5 times their purchase price. The stock rose 13.95% in the same time period, illustrating the kind of leverage that can be achieved with options. It is the second winning trade in the name posted on Investitute in as many weeks.

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

ADP pulled back today to close at $148.15, down 1.54% on the session. The human-resources and payroll outsourcing company had rallied after surpassing earnings and revenue estimates on Jan. 30.