Bulls double money in $ZAYO

Zayo Group rallied on merger news today, yielding big returns on upside option positions opened two months ago.

On March 6, Investitute’s tracking systems detected the purchase of 5,000 June $30 calls for $1.50 as part of a bullish spread with shares at $27.34. This was clearly a new position, as volume was well above the strike’s existing open interest of 3,979 contracts.

Those calls sold mostly for $3.20 today, more than twice their purchase price. The stock rose 21.1% in the same time period, showing how options can far ouperform 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.

ZAYO jumped 7.77% to $33 today. The network-technology company announced this morning that it is being acquired by investment firms Digital Colony and the EQT Infrastructure IV Fund in a deal worth more than $14 billion.