Salesforce.com has been a favorite target for upside option activity, and traders racked up exponential profits today.
On Sept. 28, Investitute’s tracking systems detected the purchase of 3,200 October $96 calls for $0.50 to $0.66 as part of a bullish spread with shares at $92.56. These were clearley new positions, as open interest in the strike was just 783 contracts before the trade occurred.
Today those calls sold for $1.50 just before the closing bell, triple their purchase price. The stock was up 4.2 percent in the same time frame, illustrating the kind of leverage that can be achieved through options. Upside trading has been consistent in Salesforce.com for several months, as Investitute co-founder Pete Najarian noted on CNBC’s “Halftime Report” on Sept. 18.
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.
CRM rose 0.62 percent to close at $96.32 today. This morning JMP Securities raised its target price on the cloud-software company to $115 from $95.