Gains stack up for calls in Newell

Bullish traders are reaping big profits in Newell Brands thanks to strong quarterly results.

On May 3, Investitute’s market scanners detected the purchase of 8,000 May $48 calls for $0.45 to $0.62 with shares at $46.12. This was clearly fresh buying, as open interest in the strike was just 441 contracts before the activity appeared.

Today those calls traded up to $4.99, the equivalent of 8 to 11 times their purchase price. The stock was up 14.5 percent in the same period, a hefty gain but nowhere near the percentage returns of the options, showing how these contracts 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.

NWL surged 11.94 percent today to close at $51.93. The consumer-products conglomerate exceeded earnings and revenue expectations before the market opened.