Traders quadrupled their money in less than a week on upside option positions in Disney.
On Monday, Investitute’s market scanners found that 2,700 Weekly $99 calls expiring today were purchased for $1.76 to $2.07 with shares at $99.35. These were clearly new positions, as open interest in the strike was only 776 contracts before the trades occurred.
Those calls rose to $7.07 today, 4 times their original purchase price. The stock rose less than 6.2 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.
DIS rose 2.05 percent to $104.78 today. Shares of the entertainment and media giant initially fell with disappointing quarterly results last night, but the stock rebounded after CEO Bob Iger assuaged analysts’ concerns on the subsequent conference call.