Call prices triple in $BUD

Bullish option traders are toasting large gains in Anheuser Busch Inbev (BUD) today.

On June 27, Investitute’s proprietary programs showed that 3,000 Weekly $87.50 calls were bought for $2.45 as part of a bullish spread with shares at $86.90. This was clearly a new position, as open interest in the strike was a mere 58 contracts before the trade occurred.

Those calls are marked at $7.85 in afternoon trading, more than 3 times their purchase price. The stock rose 9.57% 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.

BUD is up 0.93% to $95.16 this afternoon. The beer maker has rallied sharply after announcing that it will sell Australian subsidiary Carlton & United Breweries to Japan’s Asahi in a deal estimated at $11.3 billion.