Time Inc. turned enormous profits today on bullish options bought on two consecutive sessions earlier this year.
On May 23, Investitute’s tracking systems found that 6,100 January $15 calls were purchased for $0.45 and $0.50 against no open interest with shares at $12. The following day, 5,400 calls in the same strike were bought for $0.55 with the stock at $12.15.
Those calls traded up to $3.60 this morning, 8 times their original purchase price. The stock soared 53.6 percent in the same time period, 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.
TIME jumped 9.47 percent to $18.50 today. Media conglomerate Meredith announced this morning that it will buy Time Inc. in a deal valued at $2.8 billion.