Delta Air Lines has returned big profits on options that expire at the end of this week.
On Dec. 7, Investitute’s market scanners identified the purchase of 10,000 Weekly $55 calls expiring this Friday for $0.50 as part of a bullish spread with shares at $52.29. This was clearly a new position, as open interest in the strike was just 1,588 contracts before the trade occurred.
Those calls sold for $1.76 today, more than 3.5 times their purchase price. The stock rose 8.3 percent in the same time frame, showing how quickly options can far outpace gains in their underlying shares. It was the third winning trade in Delta posted on Investitute in the last month.
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.
DAL was up 1.32 percent today to close at $56.74, only $0.10 off its 52-week high. The carrier has rallied along with other airlines and the transportation sector in general this holiday season.