Upside option positions are seeing huge gains in Xerox after strong quarterly results.
On June 26, Investitute’s market scanners identified the purchase of 1,770 August $31 calls for $0.33 to $0.47 with shares at $29.25. Open interest in the strike was just 28 contracts before the activity appeared, showing that it was fresh buying.
Today those calls traded up to $2, representing an average profit of 400 percent. The stock rose 12.6 percent in the same period, illustrating the kind of leverage that can be achieved through options.
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.
XRX closed today up 0.28 percent to $32.55 after reaching a 52-week high of $32.99 in the morning. The photocopier icon beat earnings estimates while reporting improved operating margins and cash flow yesterday