Calls surge as $CSX gets back on track

Bullish traders have more than tripled their money in option positions on CSX.

Late Tuesday afternoon, Investitute’s tracking systems detected the purchase of 4,600 September $50 for $0.50 to $0.55 with shares at $49.18. This was fresh buying, as volume was above the strike’s open interest of 3,310 contracts.

Today traded up to $1.88 today, representing an average profit of more than 250 percent in less than two full sessions. The stock was up less than 4.9 percent at the same time, illustrating how quickly options can far outpace gains in their underlying shares.

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.

CSX rose 2.51 percent to $51.47 today. The railroad operator lower its full-year guidance yesterday but said the company is “returning to a normal operating rhythm,” sending shares higher by 2.49 percent in that session.