Option traders have doubled their money in upside bets on Caesars Entertainment (CZR).
On Oct. 18, Market Rebellion’s Unusual Option Activity Service found that 3,000 Weekly $42 calls, expiring this Friday, were bought for $1.86 to $1.90 with shares at $39.38. This was clearly fresh buying, as open interest in the contract was just 301 before the activity appeared.
Those calls have traded up to $5.04 so far this session, at least 2.5 times their purchase prices. The stock rose 18.92% in the same time period, a large move but nowhere near that of its options on a relative basis.
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.
CZR was last trading at $46.83, up 5.5% for the day.
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