$ILG bulls double their money

Option traders have turned big profits in the vacation-rental company near its 52-week highs.

Way back on Dec. 7, Investitute’s proprietary programs flagged the purchase of 5,000 June $30 calls for $1.90 with shares at $28.48. This was clearly fresh buying, as open interest in the strike was just 1 contract before the activity appeared.

Those calls traded for $4.85 this afternoon, more than 2.5 times their purchase price. The stock rose 22.4% in the same time period, underscoring 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 was up 0.37% today to close at $34.81, just off its 52-week high of $35. The stock has been rallying since Marriott Vacations confirmed that it will purchase the time-share company for $4.7 billion.