Bulls rolling higher with $OMC

Omnicom has rallied sharply in the last month, yielding substantial profits on upside option positions.

On May 23, Invesitute’s market scanners identified the purchase of 3,400 July $75 calls for $1 to $1.15 as part of a bullish roll with shares at $71.69. Open interest in the strike was only 471 contracts before the trade occurred, showing that this was a new position.

Those calls traded to $2.80 this morning, nearly 3 times their initial purchase price. The stock rose 6.71% in the same time period, underscoring how options can far outperform their underlying shares. Investitute co-founder Jon Najarian cited the unusual activity today on CNBC’s “Halftime Report” in explaining how the trader is rolling the position to August.

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.

OMC spiked to $77.29 this morning before pulling back with the rest of the market to close at $74.93, off 1.29% on the session. The advertising and marketing firm rebounded sharply off multi-month support at the end of May.