$UAL skies friendly for early bulls

Bullish option traders pocketed exponential gains in United Continental before shares pulled back yesterday.

On Nov. 20, Investitute’s market scanners identified the purchase of 8,000 December $60 calls for $1.06 as part of a bullish spread with shares at $58.43. This was clearly a new position, as volume was far above the strike’s open interest of 4,862 contracts.

Those calls sold for $5.20 yesterday, just shy of 5 times their purchase price. The stock rose 11.6 percent in the same time frame, illustrating how options can far outperform gains in 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.

UAL was up 0.03 percent yesterday afternoon to close at $63.55. The carrier jumped to $65.29 early in the morning after raising guidance Thursday night but declined steadily throughout the session.