$CBS calls soar 8-fold overnight

Option traders racked up stratospheric profits today on bullish positions opened in CBS one session earlier.

Just after the opening bell yesterday morning, Investitute’s market scanners identified the purchase of 1,600 June $53.50 calls for $0.19 to $0.23 with shares at $52.24. This was clearly fresh buying, as open interest in the strike was only 368 contracts before the activity appeared.

Those calls traded as high as $1.51 today, about 8 times their initial purchase price. The stock roes 5.1% at the same time, showing how options can quickly outperform gains in 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.

CBS was up 3.61% today to close at $54.27. The company rallied along with other media outlets after a federal court approved AT&T’s $85.4 billion purchase of Time Warner.