Whole Foods Market surged today on news that it was on Amazon’s shopping list, resulting in exponential profits on upside option positions.
On April 12, Investitute’s tracking systems found that 4,500 August $34 calls were purchased for $2.30 to $2.40 with shares at $34.05. This represented fresh buying, as volume was more than double the open interest in the strike.
Those calls traded for $8.87 late this afternoon, nearly tripling in value. The stock rose 26 percent in the same period, an impressive move but one that was still dwarfed by gains in the options. (These and other bullish trades were cited by Investitute co-founders Jon and Pete Najarian on CNBC’s “Halftime Report” today.)
Long calls lock in the price where the 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.
WFM spiked higher by 29.1 percent today to close at $42.68. The organic-foods grocery chain gapped up from the $33 level at the open this morning after Amazon announced plans to buy the company for $13.7 billion.