Calls double overnight in $CAT

Option traders scored substantial profits in Caterpillar today on bullish option positions opened only one session earlier.

Just yesterday, Investitute’s tracking systems detected the purchase of 3,200 January $135 calls for $3.95 to $4 as part of a bullish roll with shares at $129.06. Volume was above the strike’s previous open interest of 2,981 contracts, indicating that this was fresh buying.

Those calls traded up to $7.20 at the closing bell, nearly double their purchase prices. The stock rose 5.06% at the same time, showing how quickly options can far outperform their underlying calls.

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.

CAT was up 4.18% today to close at $136.67. The construction-equipment maker has rallied in recent days as investors have turned to beaten-down industrial names.