Patience pays off in $TWNK calls

Bullish option positions opened in Hostess Brands last fall are yielding large profits today.

Back on Oct. 27, Investitute’s tracking systems detected the purchase of 5,500 April $12.50 calls for $0.95 to $1 with shares at $11.76. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,638 contracts.

Those calls ended today’s session trading for $1.95, twice their original purchase price. The stock rallied 21.6% in the same time period, underscoring how options can outperform 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.

TWNK slipped 0.14% to $14.30 today. The snack company topped expectations on the top and bottom lines after the market closed on Feb. 28.