Option traders have posted exponential profits on upside positions in Pacific Gas & Electric.
On March 5, Investitute’s proprietary programs flagged the purchase of 5,000 18April $21 calls for $0.70 as part of a bullish spread with shares at $18.47. This was clearly a new position, as volume was well above the strike’s previous open interest of 3,972 contracts.
Those calls traded for as much as $3.95 today, more than 5.5 times their purchase price. The stock rose 34.16% in the same time, a large move but nowhere near that of its options on a relative basis.
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.
PCG was up 2.77% to $23.72 today. The San Francisco-based power company, which filed for Chapter 11 bankruptcy protection in January, rallied with other utilities after California’s governor proposed a fund to help absorb wildfire liability on Friday.