$MTOR bulls quadruple their money

Meritor surged on strong quarterly results today, handing large gains to upside option traders.

Back on Sept. 1, Investitute’s proprietary programs cited the purchase of 2,000 February $25 calls for $0.60 and $0.70 with shares at $20.38. There was no open interest in the strike before the trades occurred, showing that this was fresh buying.

Those calls sold for $2.69 this afternoon, 4.5 times their original purchase price. The stock rallied 36.6% 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.

MTOR spiked higher by 13.67% today. The drivetrain manufacturer blew past earnings and revenue estimates this morning.