$EMR calls power up huge gains

Traders posted enormous gains today on expiring options in Emerson Electric.

On Nov. 28, Investitute’s proprietary programs found that 1,000 Weekly $65 calls that expired this afternoon were purchased in one print for $0.70 with shares at $63.46. This was clearly a new position, as open interest in the strike was just 1 contract before the trade occurred.

Those calls were listed for $4.75 at the end of today’s trading, nearly 7 times their purchase price. The stock rose 9.8 percent in the same time period, showing how options can far outpace gains in their underlying shares. It is the second winning trade in Emerson posted on Investitute this 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.

EMR hit a new 52-week high of $70.21 early this morning but ended the day down 0.41 percent at $69.69. The industrial manufacturer is up sharply since withdrawing its $29 billion bid to acquire Rockwell Automation in early November.