Option traders who bet on BlackBerry last week collected their winnings today.
On Dec. 12, Investitute’s proprietary programs found that 3,500 Weekly $10.50 calls expiring on Jan. 26 were purchased for $0.75 to $0.79 with shares at $10.66. This was clearly fresh buying, as open interest in the strike was a mere 10 contracts before the activity appeared.
Those calls traded for $1.75 this morning, more than doubling their original purchase price. The stock rose 14.6 at the same time, reflecting 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.
BB opened at $12.33 today but pulled back close at $11.80, down 3.04 percent on the session. The software company beat estimates on the top and bottom lines Wednesday morning.