$ED call buyers turn profits in days

Option traders have turned quick profits on bullish positions in Consolidated Edison (ED).

On Jun. 11, Investitute’s market scanners identified the purchase of 2,000 Weekly $87 calls for $0.62 to $0.80 and 1,850 Weekly $88 calls from $0.20 to $0.35 with shares at $86.86. Both call contracts would expire today, June 14, and volume was well above the strikes’ previous open interest of 40 and 39 contracts, respectively, showing that this was fresh buying. Investitute co-founder Jon Najarian cited the unusual buying at the time on CNBC’s “Halftime Report.”

The $87 strike calls traded for $1.93 today, nearly triple their average purchase price, while the $88 strike calls would trade to a high of $0.94, nearly 4 times their average purchase price. The stock rose 2.39% in the same time frame, illustrating the kind of leverage that can be achieved 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.

ED reached $88.95 late in the session before ending the session up 0.87% at $88.54. The energy company rose today as Morgan Stanley upped its price target on the shares to $91 from $87 this morning.