Option traders quadrupled their money today in bullish Viacom positions opened only one session earlier,
Just yesterday, Investitute’s market scanners detected the purchase of 2,400 October $24 calls for $0.60 to $0.95 with shares at $24.24. Open interest in the strike was a mere 20 contracts before the trades occurred, showing that this was fresh buying.
Those calls sold for $2.50 this afternoon, more than 4 times their original purchase price. The stock rose 8.4 percent at the same time, illustrating 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.
VIAB jumped 5.82 percent to $26 today as it bounced off multi-year lows. This morning Morgan Stanley said the media company could rally above $30 if Viacom’s networks continue to be carried by cable operator Charter Communications after current negotiations.