Bullish option positions opened this morning in IBM (IBM) are paying off already.
On Mar. 27, Market Rebellion’s Unusual Activity Service detected the purchase of 15,500 Weekly $130 calls, expiring this Friday, for $0.18 to $0.72 with shares at $127.07. Open interest in the strike before the trade occurred was just 2,605 contracts, showing that this was a new position.
Those calls traded for as much as $1.35 today, well over their purchase prices. The stock rose 2.49% at the same time, underscoring how quickly options can far outperform their underlying shares.
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.
IBM settled higher on the day by 3.21% to $129.31.
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