Calls surge with Chicago Bridge

Chicago Bridge & Iron soared after winning a long-running court case, handing bullish option traders huge gains in one day.

Just yesterday, Investitute’s market scanners identified the purchase of 2,000 January $15 calls for $2.60 to $2.65 with shares at $14.32. This was clearly a new position, as volume was well above the strike’s open interest of 1,155 contracts.

Those calls sold for $6.30 late this afternoon, more than doubling in value 24 hours later. The stock spiked 40.5 percent at the same time, a huge move but one that still paled in comparison to that of the options. Stock $20.12.

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.

CBI rocketed 39.03 percent to $20.02 today. The engineering and construction company rallied sharply after winning a $2 billion court dispute with Westinghouse Electric over costs stemming from unfinished nuclear plants.