$MLCO calls draw winning hand

Patience has paid off for option traders who opened bullish positions in Melco Resorts & Enertainment last fall.

Way back on Sept. 20, Investitute’s market scanners identified the purchase of 14,000 April $25 for $1.95 as part of a bullish spread with shares at $23.96. This was clearly a new position, as open interest in the strike was only 52 contracts before that session began.

Those calls traded up to $4.35 today, more than double their purchase price. The stock rose 21.7% in the same time period, 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.

MLCO was up 1.74% to $28.71 today. The Hong Kong-based casino operator closed back above its 50-day moving average and is trying to break out of its recent range.