Bullish earnings plays paid off big in Kinder Morgan today.
Only yesterday, Investitute’s tracking systems showed that 5,200 Weekly $19.50 calls expiring on July 28 were purchased for $0.29 to $0.40 with shares at $19.61. These were clearly new positions, as open interest in the strike was just 1,324 contracts before the activity appeared.
Today those calls traded for $1.69, representing an average profit of some 400 percent. The stock was up about 8 percent at the same time, illustrating 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.
KMI jumped 4.52 percent today to close at $20.56 after beating revenue estimates and announcing that it would raise its dividend.