$ILG bulls double their money

Vacation-rental company ILG spiked higher on buyout news today, handing large profits to upside option traders.

On April 4, Investitute’s tracking systems detected the purchase of 3,000 May $32 calls for $1.25 as part of a bullish roll with shares at $30.60. This was clearly a new position, as open interest in the strike was only 87 contracts before the trade occurred.

Those calls sold for $2.90 this morning, nearly 2.5 times their purchase price. The stock rose 13.6% in the same time frame, showing how options can far outperform 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.

ILG jumped 4.53% to $34.13 today. Marriott Vacations announced this morning that it will acquired the time-share company for $4.7 billion.