Constellation Brands logged new highs today, yielding exponential gains on bullish option positions.
On Aug. 30, Investitute’s tracking systems flagged the purchase of 5,000 January $220 calls for $3.90 as part of a bullish roll with shares at $199.47. Volume was well above the strike’s open interest of 1,282 contracts, showing that this was a new position.
Those calls traded for $12.25 today, more than 3 times their purchase price. The stock rose 14.9 percent in the same time frame, illustrating how options can far outperform their underlying shares. Investitute co-founders Jon and Pete Najarian have both cited unusual bullish option activity in Constellation on CNBC in the last two weeks.
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.
STZ finished today’s session up 0.26 percent to $228.57 after reaching a 52-week high of $229.42 in the morning. The alcoholic-beverage company has rallied as it has ventured into new areas, including an investment in a Canadian marijuana business.