$PM call prices double in hours

Option traders who opened bullish positions in Philip Morris (PM) this morning were logging large gains by the afternoon.

About half an hour after the opening bell, Investitute’s tracking systems detected the purchase of 4,500 August $90 calls for $0.60 to $0.67 as part of a bullish spread with shares at $86.44. Open interest in the strike was only 129 contracts before the activity appeared.

Those calls traded for as much as $1.68 today, more than 2.5 times their purchase prices. The stock rose 3.33% at the same time, underscoring how quickly 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.

PM is up 8.97% to $88.32 in late-afternoon trading. The cigarette maker topped earnings estimates this morning and raised its guidance.