$EROS calls turn quick gains

Bullish option traders doubled down on Eros (EROS) in recent days, and those bets are already paying off today.

Investitute’s proprietary programs flagged unusual option activity in the same strike in the last two sessions:

–On June 28, 2,400 September $2.50 calls were purchased for $0.18 to $0.25 above open interest of 1,313 contracts with shares at $1.43.
–On July 1, 5,000 September $2.50 calls were bought for $0.30 to $0.35, adding to previous volume with the stock at $1.41.

Those calls traded up to $0.45 today, 2.5 times their initial purchase price. The stock rose 16.08% in the same time frame, 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.

EROS is up 5.33% to $1.59 this morning. The Indian film producer issued a business update today that refuted various accounting accusations made by a purported short seller. The company is scheduled to report earnings before the market opens on July 15.