Calls score huge profits in $CL

Bullish option traders more than tripled their money in Colgate-Palmolive today.

On Jan. 25, Investitute’s tracking systems detected the purchase of 20,000 May $65 calls, as part of a bullish roll, for $2.43 with shares at $63.07. This was clearly new positioning, as volume was far above the strike’s previous open interest of 2,843 contracts.

Those calls closed marked at $7.80 today, more than 3 times their purchase prices. The stock rose 15.41% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.

CL rose to close at $72.79 today, up 1.98% on the session. The consumer-products company has rallied since reporting earnings the morning of April 26, garnering an increase in price target from Jefferies, from $61 to $73.