$CBS calls soar fivefold overnight

Option traders cashed in huge gains in CBS today on bullish positions opened just 24 hours earlier.

Yesterday Investitute co-founder Jon Najarian found that 3,600 Weekly $22 calls expiring tomorrow were purchased for $0.25 to $0.55 with shares at $59.60. These were clearly new positions, as open interest in the strike was only 324 contracts before the trades occurred. Najarian cited the unusual activity on CNBC’s “Halftime Report” at that time.

Those calls sold for $1.35 today, more than 5 times their original purchase price just 24 hours later. The stock rose 1.9 percent at the same time, underscoring how options can quickly 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.

CBS was up 0.75 percent today to close at $60.53. The calls were purchased amid speculation of a possible deal involving the network.