Traders score big in CF Industries

Bullish investors have reaped exponential gains in option positions on CF Industries.

On June 27, Investitute’s proprietary programs found that 7,100 July $29.50 calls were purchased for $0.26 to $0.29 with shares at $27.01. These were clearly new positions, as open interest in the strike was only 53 contracts before that session began.

Today those calls traded up to $1.33, a profit of more than 350 percent. The stock was up 14 percent in the same period, showing how options can far outperform 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.

CF rose 4.69 percent to $30.81 today. The fertilizer maker has rebounded recently as analysts have become more optimistic on the beaten-down industry, as seen with a recent upgrade and winning trade in rival Potash Corporation of Saskatchewan.