$GPRE bulls double their money

Green Plains has rallied sharply in the last two weeks, handing large profits to upside option traders.

Last Thursday, Investitute’s market scanners identified the purchase of 2,000 June $20 calls for $0.70 to $0.78 with shares at $20.10. This was clearly fresh buying, as open interest in the strike was a mere 89 contracts before that session began.

Those calls traded for $1.75 today, more than twice their purchase prices. The stock rose 7.3% 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.

GPRE was up 3.36% to $21.55 today. The ethanol producer’s shares have broken out since the company reported earnings on May 7.