Calpine powers big profits for bulls

Bullish option trades have tacked on enormous gains as Calpine has rallied sharply in the last month, resulting in another enormous gain upside option trades.

On April 20, Investitute’s tracking systems found that 25,000 September $12 calls were purchased for $0.35 as part of a bullish roll with shares at $10.05. This was clearly a new position, as open interest in the strike was just 344 contracts before the trade appeared.

Today those calls traded for $1.95, a profit of more than 450 percent. The stock rose about 31 percent in the same period, a large gain but nowhere near that of the options. It was the second winning trade on CPN posted on Investitute in the last month.

Long calls lock in the price where the 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.

CPN was up 1.86 percent to close at $13.67 today. The power-generation company surged more than 25 percent in May on reports that it was exploring a sale.