Calls surge with shot from $STZ

Traders are reaping huge returns on bullish positions opened in Constellation Brands more than five months ago.

Way back on March 30, Investitute’s market scanners identified the purchase of 5,739 October $170 calls for $8.25 as part of a bullish spread with shares at $162.71. Open interest in the strike was only 394 contracts before the trade occurred, showing that it was a new position.

Those calls were marked at $40.10 today, nearly 5 times their purchase price. The stock rallied 29.1 percent in the same time frame, an impressive move but nowhere near that of its options.

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.

STZ was up 0.41 percent to close at $210.11 today. The alcoholic-beverage company exceeded quarterly expectations last night, prompting Morgan Stanley to raise its price target on the name to $245 from $218 this morning.