$NKE calls surge at new highs

Nike hit record highs after a pair of analyst upgrades today, handing sizable profits to bullish option traders.

On July 26, Investitute’s market scanners identified the purchase of 4,200 October $77.50 for $3.40 to $4.05 with shares at $78.35. Volume was well above the strike’s open interest of 1,316 contracts, indicating that this was fresh buying.

Those calls traded for $6.25 today, nearly double their initial purchase price. The stock rose 5.08% in the same time period, 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.

NKE was up 3.05% today to close at $82.18 after reaching a new lifetime high of $82.42 earlier in the session. This morning Piper Jaffray upgraded the athletic-apparel giant to “overweight” from “neutral” and raised its price target to $93 from $72, while Susquehanna lifted the name to “positive” from “neutral” and boosted its target to $93 from $78.