Bulls stampede as Deere runs

Deere rallied with strong quarterly results today, turning huge profits for bullish option traders.

On April 21, Investitute’s proprietary programs found that 4,200 May $110 calls were purchased mostly for $1.80 to $1.90 with shares at $107.42. Volume was well above the strike’s open interest of 2,516 contracts, indicating that this was fresh buying.

Today those calls traded up to $12.06, a gain of at least 530 percent. The stock rose about 13.6 percent in the same time frame, showing how far options can outperform their underlying shares.

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.

DE jumped 7.3 percent to close at $120.90 today. The agriculture-equipment maker surged after beating quarterly estimates and raising its outlook, citing unexpected demand from South America.