$BYD calls skyrocket sevenfold

Option traders posted astronomic profits today on bullish positions in Boyd Gaming.

On Dec. 13, Investitue’s market scanners identified the purchase of 3,900 January $35 calls for $0.29 to $0.40 with shares at $32.54. These were clearly new positions, as open interest in the strike was only 111 contracts before the activity appeared.

Those calls traded for $2.12 this afternoon, more than 7 times their original purchase price. The stock rose 13.4 percent in the same time frame, illustrating how options can far outperform their underlying shares. It is the second winning trade in Boyd posted on Investitute in the last three weeks.

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.

BYD jumped 4.81 percent today to close at $4.81. Bank of America upgraded the casino operator to “buy” from “neutral” and raised its price target to $42 from $36 this morning. Boyd gapped higher on Dec. 18 after announcing the purchase of $575 million in assets from rival Penn National Gaming, which has also yielded big profits on option trades.