$AVP bulls post overnight gains

Option traders tripled their money today in cheap bets made on Avon Products only one session earlier.

Just yesterday, Investitute’s tracking systems found that 12,000 Weekly $4 calls expiring on May 31 were bought in one print for $0.05 with shares at $3.51. This was clearly fresh buying, as open interest in the strike was only 711 contracts before the activity appeared.

Those calls traded for $0.15 today, 3 times their purchase price. The stock rose 13.11% at the same time, illustrating the kind of leverage that can be achieved with options.

It is the third winning trade in the name posted on Investitute since May 17.

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.

AVP reached a 52-week high of $3.98 this morning before pulling back to close at $3.60, still up 3.15% on the session. After the market closed yesterday, Brazil’s Natura Cosmeticos announced that it has reached a deal to acquire Avon in an all-stock transaction valued at about $2 billion.