$NAV bulls ride fast lane to profits

Traders more than tripled their money in Navistar today on upside option positions opened only one session earlier.

Just yesterday, Investitute’s tracking systems found that 1,500 Weekly $42.50 calls expiring this Friday were purchased for $1.35 as part of a bullish spread with shares at $42.04. This was clearly a new position, as open interest in the strike was only 123 contracts before that session began.

Those calls traded up to $4.72 this morning, 3.5 times their purchase price. The stock rose 11.6 percent at the same time, showing 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.

NAV jumped 7.37 percent to $45.30 today. The truck maker topped earnings and sales expectations before the market opened this morning.