$MO bulls quintuple money

Option traders scored big profits on upside positions in Altria (MO) today.

On Aug. 13, Our market scanners showed that 2,464 Weekly $47.50 calls expiring on Sept. 27 were bought for $0.98 as part of a bullish roll with shares at $46.53. This was clearly a new position, as open interest in the strike was a mere 90 contracts before the trade occurred.

Those calls sold for as much as $5 this morning, more than 5 times their purchase price. The stock rose 11.58% in the same time frame, showing how quickly 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.

MO spiked to $52.43 this morning but has pulled back with the broader market to trade at $45.33 this afternoon, down 3.81% on the session. The cigarette and wine company initially rallied on news that it is in merger talks with Phillip Morris (PM).