Bulls post quick profits in $ORCL

It took less than a week for option traders to double their money in Oracle.

On Nov. 12, Investitute’s market scanners found that 5,600 Weekly $50 calls expiring Nov. 30 were purchased for $0.85 to $0.98 with shares at $49.90. This was clearly fresh buying, as open interest in the strike was only 407 contracts before the trades occurred. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $1.81 today, twice their average purchase price. The stock rose 3.09% in the same time frame, showing how quickly 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.

ORCL was up 1.07% to $51.17 today. Shares rallied after Warren Buffett’s Berkshire Hathaway reported that it had opened a position in the software company.