Traders who opened bullish positions in NIC this morning walked away with big gains by the afternoon.
Barely an hour after the opening bell, Investitute’s tracking systems detected the purchase of 2,100 January $20 calls for $0.25 to $0.50 with shares at $18. These were clearly new positions, as open interest in the strike was only 365 contracts before the session began.
Those calls rose to $0.90, more than 3.5 times their original purchase price, about two hours later after Investitute’s Jon Najarian cited the buying on CNBC’s “Halftime Report.” The stock gained less than 3.9 percent at the same time, showing how quickly options can far outpace gains in their underlying shares. Volume in the options surged above 10,800 by the end of the day.
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.
NIC ended today up 2.53 percent at $18.25. Short interest in the company, which provide technology services to government agencies, is estimated as highs as 18 percent of its float.