Take-Two Interactive Software spiked higher good quarterly numbers this morning, handing exponential profits to option traders.
On Sept. 25, Investitute’s tracking systems detected the purchase of 4,600 November $100 calls for $4 as part of a bullish spread with shares at $97.10. This was clearly fresh buying, as open interest in the strike was a mere 41 contracts before that session began.
Those calls traded up to $20 today, 5 times their purchase price. The stock rose 23.6 percent in the same time period, an impressive rally but nowhere near that of its options on a relative basis.
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.
TTWO jumped 10.58 percent to $117.65 today. The game developer reported strong sales and raised its outlook after the market closed yesterday.