Coty surged on strong quarerly results today, yielding huge returns on upside option positions in the cosmetics company.
On Oct. 31, Investitute’s market scanners identified the purchase of 2,990 November $17 calls for $0.21 with shares at $15.28. This was clearly fresh buying, as open interest in the strike was only 709 contracts before that session began.
Those calls traded as high as $80 this morning, nearly 4 times their purchase price. The stock rose 14.2 percent in the same time frame, showing how options can far outperform 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.
COTY jumped 13.82 percent today to close at $16.80. The company beat earnings estimates before the market opened.