$CNI call prices track higher

Option traders are seeing big gains on upside option positions today in Canadian National Railway (CNI).

On Jul. 21, Market Rebellion’s Unusual Activity programs detected the the purchase 7,355 August $115 calls for $0.45 as part of a bullish spread with shares at $104.44.

Those calls have traded for as much as $2.55 this session, at least 4 times their purchase prices. The stock gained 5.1% at the same time, a large move but nowhere near that of its options on a relative basis.

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.

CNI was last lower on the day by 0.29% at $107.70 after trading as high as $110.66 earlier. The freight railway announced after the close yesterday that it plans to make a new, increased offer for Kansas City Southern (KSU).