It took just four sessions for traders to double their money in Pepsico.
On Tuesday, Investitute’s market scanners identified the purchase of 5,000 April $135 calls for $0.33 to $0.36 with shares at $118.92. This was clearly a new position, as open interest in the strike was a mere 15 contracts before the trade occurred. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”
Those calls sold for $0.85 this morning, more than 2.5 times their original purchase price. The stock rose less than 0.6 percent at the same time, illustrating the kind of leverage that can be achieved through options.
Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
PEP, which reached a 52-high of $120.56 this morning, ended today’s session up 0.48 percent to $119.92. The snack and soda company has rallied as the company has diversified its offerings.