$WEN bulls gobble more profits

Option traders have tripled their money in Wendy’s after just a few short weeks.

On Dec. 1, Investitute’s proprietary programs cited the purchase of 3,200 January $15 calls for $0.44 to $0.65 with shares at $14.82. These were clearly new positions, as open interest in the strike was only 852 contracts before the trades occurred.

Those calls went for $1.60 today, more than 3.5 times their original purchase price. The stock rose 11.5 percent in the same time frame, underscoring how options can far outperform their underlying shares. It is the second winning trade in Wendy’s posted on Investitute in the last seven six sessions.

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.

WEN slipped 0.67 percent today to close at $16.42 but is still not far from its 52-week high of $16.98 reached last week. The fast-food chain is up sharply since reports late last month showed that it could gain about $450 million through Roark Capital Group’s proposed acquisition of Buffalo Wild Wings. Wendy’s owns 18.5 percent of Arby’s, which in turn is owned by Roark.