Call buyers shoot for profits in $SWBI

Option traders are shooting for profits in upside positions in Smith & Wesson-(SWBI) today.

On Apr. 27, Market Rebellion’s Unusual Activity Service identified the the purchase of 4,000 June $17.50 calls for $1.65  to $1.95 with shares at $17.74. Volume was clearly above the previous open interest of 2,601 contracts, indicating that this was a new position.

Those calls have traded up to $6.00 so far today, over 3 times their purchase prices. The stock rose 32.86% in the same time frame, underscoring how 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.

SWBI was last up 15.81% at $23.07. The firearms, ammunition and restraints manufacturer topped earnings estimates in its quarterly report after the close yesterday.