Bulls in overdrive with $FCAU rally

Upside option positions in Fiat Chrysler have soared sixfold just one week after they were opened.

On Jan. 5, Investitute’s proprietary systems flagged the purchase of 2,600 January $22 calls for $0.30 to $0.55 with shares at $21.80. These were clearly new positions, as open interest in the strike was only 301 contracts before the trades occurred.

Those calls sold for $1.75 today, nearly 6 times their original purchase price. The stock rose 8.7 percent in the same time frame, underscoring the kind of leverage that options can provide. It is the second winning trade in Fiat Chrysler posted on Investitute in the last week.

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.

FCAU jumped to a 52-week high of $23.80 this morning but pulled back to close at $23.39, off 0.13 percent on the day. The auto maker announced that it will move one of its manufacturing plants to Detroit from Mexico and pay workers $2,000 bonuses made possible by the new corporate tax cuts.