$RTN call prices spike fourfold

Bullish option traders have been raking in profits on Raytheon (RTN) for weeks, and today is no exception.

On Sept. 5, Market Rebellion’s proprietary programs flagged the purchase of 2,000 October $200 calls for $0.87 to $0.95 with shares at $186.04. This was clearly fresh buying, as open interest in the strike was a mere 115 contracts before that session began.

Those calls have traded for as much as $3.45 so far today, about 4 times their initial purchase price. The stock rose 8.68% in the same time period, underscoring 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.

RTN is up 1.49% to $202.35 this morning. The defense contractor is scheduled to report earnings before the market opens on Oct. 24.