Calls heat up with $FSLR at new highs

Bullish option traders posted exponential gains in First Solar after a favorable trade decision.

On Wednesday, Investitute’s tracking systems identified the purchase of 2,000 October $54 calls for $0.80 to $0.86 with shares at $48.08. These were clearly new positions, as open interest in the strike was only 489 contracts before the activity appeared.

This morning those calls traded up to $2.58, more than triple their original prices. The stock rose less than 7.2 percent at the same time, showing how quickly options can far outpace gains in their underlying shares. It was the third winning trade for September calls in First Solar posted on Investitute.

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.

FSLR jumped 5.43 percent to close at $51.41 after reaching a new 52-week high of $53 earlier in the session. The solar-energy company surged after U.S. trade regulators ruled that imports were harming domestic manufacturers.