Bulls chugging higher with $CSX

CSX pulled back after quarterly results early this week, but option traders still turned significant profits on positions that expired yesterday.

On Dec. 18, Investitute’s proprietary systems cited the purchase of 4,500 January $54 calls for $1.28 to $1.41 with shares at $53.07. There was no open interest in the strike before that session began, showing that these were new positions.

Those calls traded for $3.55 yesterday, nearly 3 times their original purchase price. The stock rose 8.2 percent in the same time period, illustrating the kind of leverage that can be achieved through 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.

CSX spiked to $58.16 yesterday morning before pulling back and closing at $57.49, off 0.96 percent on the session. The railroad operator fell this week despite beating earnings estimates on Tuesday.