Bulls double their money in $KKR

KKR rallied on corporate-restructuring developments today, returning significant profits on upside option positions.

On April 25, Investitute co-founder Jon Najarian noted that 2,000 Weekly $20 calls expiring tomorrow were purchased at the same time for $1.20 and $1.40 with shares at $21.04. Open interest in the strike was only 323 contracts, showing that this was a new position.

Those calls sold for $3 this morning, 2.5 times their initial purchase price. The stock rose 9.4% in the same time frame, illustrating the kind of leverage that can be achieved with options.

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.

KKR was up 2.98% to $22.14 today. The private-equity firm announced this morning that it is converting to a corporation from a partnership, a move intended to take advantage of tax changes and draw more investors.