$PLUG calls power up profits

Plug Power (PLUG) is powering higher today, and bullish option traders are taking profits.

On Oct. 2, Market Rebellion’s Unusual Activity Service identified the purchase of 7,600 Weekly $14.50 calls, expiring this Friday, Oct. 9, for $0.38 to $0.55 with shares at $14.16. This was clearly fresh buying, as open interest in the strike was only 1,182 contracts before the activity appeared.

Those calls have traded for as much as $2.02 today, about 4 times their purchase prices. The stock rose 16.38% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

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.

PLUG was last up 4.64% at $16.47 in afternoon trade, just shy of its new high of $16.50 made this session. Morgan Stanley upgraded the hydrogen fuel cell manufacturer to Overweight from Equal Weight on Sep. 28 while also raising its price target on the shares to $14 from $10.25.