$PEP calls score 3-fold gains

Bullish option traders have tripled their money on upside positions opened in Pepsico on the last day of 2018.

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

Those calls sold for $12.18 today, about 3 times their purchase price. The stock rose 15.08% in the same time period, showing how options can far 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.

PEP spiked to an all-time high of $128.26 at the end of last week but pulled back today to close at $126.44, off 0.51% on the session. Goldman Sachs upgraded the name to “neutral” from “sell” on Friday and raised its price target to $132 from $111 after the snack and beverage company beat earnings and revenue estimates on April 17.