Mattel spiked higher late in today’s session, resulting in stratospheric gains on bullish option positions opened just a few sessions ago.
Last Thursday, Investitute’s tracking systems showed that 13,400 Weekly $16.50 calls expiring this Friday were purchased for $0.15 to $0.35 with shares at $15.18. These were clearly new positions, as open interest in the strike was only 27 contracts before that session began.
Those calls rose to $2.40 this afternoon, 16 times their original purchase price. The stock rose 23.4% at the same time, a large move but nowhere near the parabolic move in its options.
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.
MAT surged 10.38% to $17.76 today. There was no apparent reason for the toy maker’s sharp rally this afternoon, but reports circulated late last year on a potential bid by rival Hasbro.