Upside option traders posted quick profits in Sprint amid reports of advanced merger negotiations.
On Sept. 7, Investitute’s market scanners identifed the purchase of 3,100 October $9 calls for $0.13 with shares at $8.03, followed by another 59,600 calls bought in the same strike on Tuesday. Volume was well above open interest in both contracts, indicating that this was fresh buying.
Those calls traded up to $0.24 this morning, nearly double their original price. The stock rose 6.1 percent in the same time frame, underscoring how options can provide significant leverage.
Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
S jumped 6.1 percent to $8.52 today. Shares rallied sharply this morning after Reuters reported that the wireless carrier is close to a striking a merger deal with rival T-Mobile.