Bullish option traders posted large profits today in Emerson Electric.
On Nov. 9, Investitute’s proprietary systems cited the purchase of 5,300 December $65 calls for $0.25 to $0.30 with shares at $51.91. Volume was well above the strike’s open interest, indicating that these were new positions.
Those calls traded as high as $0.80 this afternoon, more than 3 times their original purchase price. The stock rallied 24.8 percent in the same time, a large gain but one that was still far below that of its options on a relative basis.
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.
EMR slipped 0.2 percent today to close at $64.69. The industrial manufacturer rallied after withdrawing is $29 billion offer to acquire Rockwell Automation on Tuesday.