Nokia (NOK) option bulls made the call for big profits today.
On Jan. 14, Market Rebellion’s Unusual Activity Service found that 9,500 Weekly $4.50 calls expiring this Friday on Jan. 29 were bought for $0.06 to $0.12 with shares at $4.20. This was clearly fresh buying, as open interest was only 2,734 contracts before the activity appeared.
Those calls traded for $3.50 this session, at least 29 times their purchase prices. The stock rose 109.76% at the same time, showing how options can far outperform gains in 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.
NOK rallied 38.48% to close at $6.55 today after reaching as high as $9.79. The telecommunications company is scheduled to report earnings on Feb. 4 after the closing bell.