Patience pays off for $PEP bulls

Option traders have doubled their money on upside positions opened New Year’s Eve in Pepsico.

On Dec. 31, Investitute’s tracking systems detected the purchase of 7,500 June $115 calls in one print for $4.20 with shares at $109.97. This was clearly a new position, as volume was far above the strike’s existing open interest of 1,193 contracts. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $8.12 today, about twice their purchase price. The stock rose 10.22% in the same time period, illustrating the kind of leverage that can be achieved with 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.

PEP was up 0.11% to $120.85 today. The beverage and snack company has rallied in the last week since breaking recent resistance around the $117 level.