$KMI call buyers turn quick profits

It took just two weeks for bullish option traders to triple their money in Kinder Morgan (KMI).

On Dec. 5, our Unusual Activity Service detected the purchase of 7,000 December $19.50 calls expiring tomorrow for $0.30 to $0.38 with shares at $19.62. This was clearly fresh buying, as open interest in the strike was only 388 contracts before that session began.

Those calls sold for $1.29 today, more than triple their purchase prices. The stock rose 6.01% 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.

KMI is currently up 0.43% to $20.81. The pipeline operator was initiated with a Neutral at Piper Jaffray, yesterday morning, with a price target of $23.