$NSC call buyers steam ahead

Option traders rode their way to profits with substantial gains in Norfolk Southern as shares rallied today.

On July 10, Investitute’s tracking systems found that 5,000 Weekly $162.50 calls expiring this Friday were purchased for $1.95 as part of a bullish spread. Shares at the time were $158.55. Volume was clearly above the strike’s open interest of 2 contracts, showing that this was fresh buying.

Those calls ended today’s session trading for $5.50, almost 3 times their initial purchase price. The stock rose 5.85% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.

NSC popped 4.91% to close at a new lifetime high of $168.36 today. The railroad operator reported earnings this morning that beat estimates on its top and bottom lines.