It took barely a week for traders to turn significant profits in Trinity Industries.
On Dec. 4, Investitute’s market scanners detected the purchase of 5,200 January $36 calls for $1.15 with shares at $35.93. This was clearly fresh buying, as open interest in the strike was only 325 contracts before the activity appeared. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”
Those calls traded up to $2, nearly doubling their purchase price, as Najarian said in an update on the position this afternoon. The stock rose less than 4 percent in the same time frame, underscoring 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.
TRN was up 2.97 percent today to close at $36.87. The industrial manufacturer won a multi-year court case in late September and has rallied sharply in the last several weeks.