Traders posted exponential gains in Overstock.com before their bullish options expired this afternoon.
On Oct. 24, Investitute’s proprietary programs found that 3,600 December $40 calls were purchased for $3.20 to $5.60 with shares at $38.90. These represent new positions, as open interest in the strike was 1,917 contracts before the trades occurred.
Those calls sold for $24.24 today, more than 7.5 times their original purchase price. The stock surged 65.6 percent in the same time frame, a huge gain but still nowhere near that of its options.
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.
OSTK jumped 11.14 percent to close at $68.35 today after posting a 13-year high half an hour earlier. The discount retailer rallied sharply after its CEO disclosed plans to refocus the company on blockchain technology.