Bullish option traders scored big gains today in Trinity Industries, which won a major court ruling Friday evening.
Last Thursday, Investitute’s tracking systems detected the purchase of 15,000 April $32 calls for $2.30 as part of a bullish roll with shares at $30.98. This was clearly a new positions, as open interest in the strike was a mere 31 contracts before the activity appeared.
Those calls traded up to $5.70 today, 2.5 times their purchase price. The stock rose 15 percent in the same time frame, illustrating the kind of leverage that can be achieved through options. Investitute co-founder Jon Najarian, who had picked Trinity for his final trade on CNBC’s “Halftime Report” last Thursday based on the unusual option activity, gave an update on the position today.
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.
TRN surged 10.69 percent today to close at $35.31. After the market closed Friday, the industrial manufacturer announced that a federal appellate court had ruled that the company did not commit fraud in a 2015 case involving its guardrails, overturning a lower-court decision.