Bulls score major profits with $REGI

Option traders have scored major profits on upside positions in Renewable Energy Group (REGI).

On Dec. 11, our Unusual Activity Service detected the purchase of 3,093 December $20 calls in one print for $0.20 with shares at $17.42. This was clearly fresh buying, as open interest in the strike was only 2,275 contracts before that session began.

Those calls have sold for as much as $5.70 so far today, over 28 times their initial purchase price. The stock rose 47.88% in the same time frame, underscoring 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.

REGI is off 0.24% on the session at $25.02. The biodiesel production company’s shares shot higher yesterday after the Congressional budget was amended to include the biodiesel tax credit.