Call buyers gobble up gains in $TSN

Upside option positions opened in Tyson Foods months ago are paying off today.

On June 1, Investitute’s proprietary programs found that 2,500 October $60 calls were purchased for $2.50 to $2.55 with shares at $58. Open interest in the strike was only 335 contracts before the activity appeared, showing that this was fresh buying.

Those calls traded for $10.20 this morning, 4 times its original prices. The stock rose 20.9 percent in that time period, a significant move but nowhere near that of its 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.

TSN jumped 7.64 percent to $70.45 today. Yesterday afternoon the meat producer raised its full-year outlook while announcing a restructuring that will eliminate 450 jobs.