Call buyers clean up with $CL profits

Bullish option traders are doubling their money in Colgate-Palmolive (CL) today after its quarterly earnings report.

On Dec. 19, our Unusual Activity Service detected the purchase of 10,000 May $75 calls, as part of a bullish roll, for $0.99 with shares at $68.39. This was clearly new positioning, as volume was far above the strike’s previous open interest of 357 contracts.

Those calls have traded for as much as $2.70 today, more than 2.5 times their purchase price. The stock had risen 9.14% in the same time frame, 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.

CL is currently trading higher on the session by 6.1% at $73.77. The consumer-products company reported quarterly earnings before the opening bell, beating revenue estimates and forecasting 3%-5% organic sales growth for the fiscal year.