$AXTA call prices up 6-fold

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

On April 23, Investitute’s market scanners identified the purchase of 2,000 July $30 calls for $0.80 and $0.85 as part of a bullish roll with shares at $27.83. This was clearly a new position, as open interest in the strike was only 144 contracts before that session began.

Those calls traded for as much as $5 today, 6 times their average purchase price. The stock rallied 24.79% 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 is just off session highs at $30.64 in the final hour of trading, only pennies away from its 52-week peak of $30.93. The specialty coatings company rose sharply yesterday after Bloomberg reported that activist hedge fund Jana Partners had been building a stake in the name.