$STAY bulls check out with gains

Traders have tripled their money on upside positions opened in Stay America just one week ago.

On Dec. 12, Investitute’s proprietary programs cited the purchase of 4,000 January $17.50 calls for $0.50 to $0.55 with shares at $17.31. This was clearly fresh buying, as open interest in the strike was a mere 42 contracts before the activity appeared.

Those calls sold for $1.50 today, 3 times their original purchase price. The stock rose 9 percent in same time frame, showing how quickly 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.

STAY was up 2.76 percent to $18.62 today. The hotel chain raised its profit and revenue outlook while announcing the resignation of its CEO after the market closed yesterday.