Bullish option traders are posting exponential gains in Melco Resorts & Entertainment (MLCO) this session.
On Oct. 28, Market Rebellion’s Unusual Option Activity Service found that 2,000 December $5 calls were bought for $0.65 to $0.72 with shares at $4.81. This was clearly fresh buying, as open interest in the contract was just 55 before the activity appeared.
Those calls changed hands for as much as $3.11 today, at least 4 times their purchase prices. The stock rose 67.36% in the same time frame, 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.
MLCO settled up 9.81% at $7.95 this session.