Call prices triple in $BUD

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

Just yesterday afternoon, Market Rebellion’s Unusual Activity programs flagged the the purchase of 2,000 Weekly $71 calls, expiring tomorrow, May 7, for $0.87 to $1.20 as part of a complex bullish spread with shares at $70.31. Volume was clearly above the previous open interest of 229 contracts, indicating that this was a new position.

Those calls have traded up to $4.50 so far this morning, more than 3 times their purchase prices. The stock rose 7.37% 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 5.14% to $74.25this morning. The beer maker topped bottom line earnings expectations before the market opened this morning.