$CRON calls turn quick profits

Option traders who opened bullish positions in Cronos Group about halfway through today’s session were posting substantial gains only a few hours later.

Early this afternoon, Investitute’s market scanners identified the purchase of 2,200 October $10.50 calls for $0.50 to $1.05 as shares moved from $10.65 to $11.20. Volume was well above the strike’s open interest of 1,771 contracts, indicating that this was fresh buying.

Those calls rose to $1.60 by the closing bell, double their average purchase price. The stock rose about 7.32% at the same time, showing how quickly options can far outpace 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.

CRON surged 19.07% to $11.74 ahead of Canada’s full legalization of marijuana on Oct. 17. The Toronto-based company invests in medical-cannabis producers.