Bullish option traders posted stratospheric profits after Verizon Communications reported strong sales this morning.
On July 20, Investitute’s tracking systems found that 3,900 Weekly $45.50 expiring tomorrow calls were bought for $0.11 to $0.18 with shares at $44.43. This was clearly fresh buying, as open interest in the strike was a mere 69 contracts before the activity appeared.
Those calls traded as high as $2.33 today, a gain of more than 12,000 percent just one week after they were purchased. The stock rose less than 7.7 percent at the same time, showing how quickly options can far outpace 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.
VZ jumped 7.68 percent to $47.81 today. The wireless carrier’s revenues surpassed estimates in its first full quarter with unlimited-data plans.