$PCG electrifies call prices

Prescient option traders scored quick, exponential profits today in short-duration PG&E Corp. calls.

Just yesterdayInvestitute’s tracking systems detected the purchase of 10,000 Weekly $10 calls expiring on February 1 for $0.30 with shares at $7.72. Open interest in the strike was only 1,539 contracts before the trade occurred, indicating that this buying was fresh interest.

Then again today, 10,000 Weekly $12 calls expiring on February 8 were bought for $0.30 with shares at $7.35. Open interest in that strike was a mere 109 contracts before this trade as well, indicating new interest.

Those 08February $12 calls traded for as much as $5.80 today, 29 times their purchase price and less than an hour after their opening. Likewise, the 01February $10 calls traded up to $5.30, over 17 times their purchase price overnight. The stock rallied around 80% in the same time frame, a huge move but it underscores how options 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.

PCG was down as much as 9.09% today before rallying to close up 74.59% to $13.95 on the day. Shares of the utility company sparked higher after the California Department of Forestry and Fire Protection said the Tubbs Fire “was caused by a private electrical system adjacent to a residential structure.” It found the company not responsible for the 2017 Tubbs Fire.

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