Bulls make big gains in $RESI

Option traders are already making substantial gains on bullish positions opened in Front Yard Residential (RESI) towards the end of last month.

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the name on two consecutive sessions:

–On Nov. 21, 12,000 January $12.50 calls were purchased for $0.20 to $0.25 above open interest of 700 contracts with shares at $10.50.
–On Nov. 22, 3,787 January $12.50 calls were bought for $0.40 below open interest but apparently added to the volume in the previous day’s trade, with shares higher at $11.19.

Those calls have traded for as much as $1.20 today, 6 times their initial purchase price. The stock rose 23.24% at the same time, 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.

RESI jumped to a new 52-Week high of $13.07 today and closed up by 9.66% at $12.71. The real estate investment firm shot higher today after Bloomberg reported that it was in advanced talks to be acquired by Amherst Holdings.