Call prices triple in $EMR

Option traders are posting big profits today on bullish positions opened in Emerson Electric (EMR) ahead of its last earnings report.

On Oct. 21, Market Rebellion’s Unusual Activity programs flagged the purchase of 2,200 January $72.50 calls for $1.60 to $1.70 with shares at $69.45. This was clearly fresh buying, as open interest in the strike was only 1,407 contracts before the activity appeared.

Those calls have traded for as much as $4.80 so far today, about three times their average purchase price. The stock rose 11.09% at the same time, 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.

EMR is nearly unchanged at $77.02 this morning, just below its 52-Week high of $77.51. The automation-equipment maker’s shares have traded higher since beating analysts’ earnings-per-share expectations on Nov. 5.