$KKR yields quick profits on calls

Bullish option traders more than doubled their money in KKR this morning.

On Oct. 30, Investitute’s tracking systems found that 32,300 January $25 calls were purchased mostly in one print of 30,866 for $0.55 and $0.60 with shares at $22.67. This was clearly fresh buying, as volume was far above the strike’s previous open interest of 10,500 contracts.

Those calls traded for as much as $1.60 this morning, more than 2.5 times their purchase price. The stock rose 11.29% 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.

KKR rose to $25.30 early today but pulled back with the broader market to close at at $23.89, down 2.27% on the session. Shares rallied yesterday after the New York Post reported that the private-equity firm was bidding for Acadia Pharmaceuticals.