Option traders pocketed big profits in Delta Air Lines yesterday before weather-related news sent shares lower.
On Nov. 21, Investitute’s proprietary systems cited the purchase of 10,000 December $51 calls for $1.09 as part of a bullish spread with shares at $50.50. Volume was well above the strike’s open interest of 5,163 contracts, showing that this was a new position.
Those calls sold for $3.68 yesterday, more than triple their purchase price. The stock rose less than 8 percent in the same time frame, underscoring the kind of leverage that is possible with options.
Long calls lock in the price where a 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.
DAL was up 0.09 percent yesterday afternoon to close at $53.46. The stock popped to $54.61 early in the morning after United Continental and Southwest Airlines raised revenue guidance Thursday evening, but Delta’s shares fell throughout the session as snowstorms canceled hundreds of flights.