Bulls feast on gains in $MDLZ

Option traders tripled their money in Mondelez today after strong quarterly results.

On May 4, Investitute’s proprietary programs cited the purchase of 5,100 September $40 calls for $1.12 to $1.34 with shares at $38.54. This was clearly fresh buying, as open interest in the strike was only 261 contracts before the activity appeared.

Those calls traded as high as $3.95 today, 3 times their purchase prices. The stock rose 13.08% in the same time period, illustrating how options can far outperform 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.

MDLZ jumped 4.27% to $43.27 today. The snack and beverage company reported second-quarter earnings that topped expectations after the market closed yesterday.