$RGC bulls score blockbuster win

Option positions in Regal Entertainment surged sixfold on takeover news today.

On Oct. 27, Investitute’s tracking systems found that 7,000 December $17.50 calls were purchased for $0.50 as part of a bullish spread with shares at $16.40. Open interest in the strike was a mere 96 contracts before the trade occurred, showing that this was a new position.

Those calls traded for $3 this afternoon, 6 times their purchase price. The stock rose 22.4 percent in the same time frame, an impressive gain but nowhere near that of the options on a relative basis.

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.

RGC jumped 7.62 percent to $19.64 today. The theater chain rallied sharply on reports that it had been approached by U.K.-based Cineworld Group for a possible acquisition.