Upside options in Generac posted stratospheric returns before expiring this afternoon.
On Aug. 24, Investitute’s market scanners detected the purchase of 2,900 September $37.50 calls for $0.40 to $1.15 with shares at $37.68. Open interest in the strike was just 115 contracts before the trades occurred, showing that they were new positions.
Those calls traded as high as $7.75 today, more than 19 times their original price. The stock rallied 19.7 percent in the same time period, underscoring how options can far outperform their underlying calls.
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.
GNRC jumped 4.91 percent to $45.28 today. The maker of power generators surged when Harvey was upgraded to hurricane status in late August, and shares have continued to climb since.