$WEN calls quadruple overnight

Traders are making fast money on bullish positions in Wendy’s, which has been ripping higher since Thanksgiving.

Just yesterday, Investitute’s tracking systems detected the purchase of 6,000 January $17 calls for $0.15 to $0.25 with shares at $16.31. These were clearly new positions, as open interest in the strike was only 5 contracts before the activity appeared. Investitute co-founder Pete Najarian cited the unusual activity at the time on CNBC’s “Halftime Report.”

Those calls traded up to $0.60 this morning, 4 times their original purchase price. The stock rose 3.4 percent at the same time, showing how quickly options can far outpace 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.

WEN was up 1.1 percent to close at $16.58 today after reaching a 52-week high of $16.98 this morning. The fast-food chain has been climbing since Nov. 28 on reports 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.