$NXST bulls quintuple their money

Nexstar Media rallied on takeover news today, returning huge gains on upside option positions.

Two months ago, Investitute’s tracking systems detected bullish trades in NXST using the same strategy on two consecutive days:

–On May 22, 4,000 November $80 calls were bought for $1.95 above open interest of 2,179 contracts as part of a bullish spread with shares at $69.15.

–On May 23, another 4,000 November $80 calls were purchased for $1.72 to $1.90 as part of the same vertical spread with shares at $68.10.

Investitute co-founder Jon Najarian cited this highly unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $10.31 this morning, more than 5 times their purchase prices. The stock rallied nearly 30% in the same time period, a huge move but nowhere near that of its options.

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.

NXST was up 3.71% today to close at $81 even. Shares jumped this morning after Reuters reported that private-equity firm Apollo Global Management is considering a bid for the broadcast and digital media company, according to unidentified sources.