How $RGC calls skyrocketed tenfold

Bullish option traders racked up stratospheric gains today on confirmation that Regal Entertainment was being acquired.

On Oct. 27, Investitute’s tracking systems detected the purchase of 7,000 December $17.50 calls for $0.50 as part of a bullish spread with shares at $16.40. This was clearly a new position, as open interest in the strike was a mere 96 contracts before the trade occurred.

Those calls changed hands for $5.20 today, more than 10 times their purchase price. The stock surged 38.4 percent in the same time period, a huge gain but still 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.

RGC jumped 9.41 percent to $22.68 today. The stock spiked higher this morning after U.K.-based Cineworld agreed to purchase the Tennessee-based theater chain for $3.6 billion, adding to gains last week on speculation.