Bullish option traders tripled their money in TripAdvisor today following its sharp rebound last week.
Last Tuesday, Investitute’s market scanners identified the purchase of 8,800 January $35 calls for $0.90 to $1.05 with shares at $31.96. These were clearly new positions, as volume was well above the strike’s open interest of 2,360 contracts. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”
Those calls traded for $2.72 this morning, 3 times their original purchase price. The stock rose less than 11.3 percent in the same time, illustrating the kind of leverage that can be achieved through 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.
TRIP was up 0.67 percent today to close at $34.40. The travel-review site bounced off its 52-week low last Monday and ended up as last week’s top performer in the S&P 500.