Call buyers ride $FCAU breakout

Fiat Chrysler has surged in the New Year, and option traders are being rewarded for their patience.

On Sept. 22, Investitute’s proprietary programs cited the purchase of 22,000 March $15 calls for $3.80 as part of a bullish roll with shares at $17.99. Volume was well above the strike’s open interest of 12,842 contracts, showing that this was fresh buying.

Those calls traded for $7.10 today, nearly double their purchase price. The stock rose 21.4 percent in the same time period, a large move but still well below that of its options on a relative basis. Investitute co-founders Jon and Pete Najarian have cited unusual activity repeatedly on CNBC in recent months.

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.

FCAU jumped 5.42 percent today to $21.77. The auto maker reported strong sales in its Jeep Cherokees and Chrysler Pacifica minivans this morning.