$RRD option bulls double money

On Oct. 1, Market Rebellion’s Unusual Activity Service identified the purchase of 2,999 December $6 calls for $0.50 with shares at $5.29. This was clearly fresh buying, as open interest in the strike was only 325contracts before the activity appeared.

Those calls have traded up to $1.25 this session, over 2 times their purchase price. The stock rose 31.76% in the same time frame, 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.

RRD was last up by 34.89% to $6.65 in late day trade. Chatham Asset Management sent a $7.50 per share buyout proposal to the integrated communications company this morning.