$AXTA call prices double

Bullish option traders have racked up quick gains in Axalta Coating (AXTA).

On Friday, Jan. 31, our Unusual Activity scanners identified the purchase of 10,000 March $29 calls for $0.85 to $1.00 with shares at $28.06. This was clearly a new position, as open interest in the strike was only 75 contracts before that session began.

Those calls traded for as much as $2.20 today, at least 2 times their purchase prices. The stock rallied 7.45% in the same time period, a large move but nowhere near that of its options 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.

AXTA closed at $29.67, up 2.91% for the session. The specialty coatings company rose sharply after BMO Capital upgraded the stock to Outperform from Market Perform with a $35 price target, lowered from $38.