$MAT calls post huge gains after 1 day

Staying ahead of the curve once again, option traders turned enormous gains today on bullish positions in Mattel that were opened even as the stock plunged last week.

As the toy maker’s shares dropped 9 percent on Friday, Investitute’s market scanners identified the purchase of 26,000 November $15.50 calls for $0.05 to $0.15 with shares at $13.53. These were clearly new positions, as open interest in the strike was only 866 contacts before the activity appeared.

Those calls traded for $0.85 today, 17 times their original purchase price. The stock rose 15 percent at the same time, an impressive move but nowhere near that of 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 jumped 11.29 percent to $15.58 today. After the ailing company reported dismal quarterly results at the end of last week, analysts gave investors hope by saying an acquisition may be inevitable.