$HII call prices float higher

Option traders are racking up enormous profits today on upside positions opened in Huntington Ingalls Industries (HII) ahead of its most recent earnings report.

On Oct. 22, Market Rebellion’s proprietary programs found that 2,150 December $230 calls were bought for $2.60 to $2.80 with shares at $211.66. Open interest in the strike was a mere 193 contracts before the trade occurred, showing that this was a new position.

Those calls have traded for as much as $26.00 today, 10 times their initial purchase price. The stock has gained 20.75% at the same time, a large move but still nowhere near that of its 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.

HII is unchanged for the session at $254.20 in afternoon trading. The military shipbuilder delivered its last quarterly report on Nov. 7 where it beat on bottom line expectations and announced an increase to its share repurchase program by $1 billion.