$SNE call prices double

Bullish option traders have more than doubled their money in upside positions on Sony (SNE) today.

On Oct. 29, Market Rebellion’s Unusual Activiy Scanners found that 5,000 January $87.50 calls were bought for $3.10 as part of a complex bullish spread, selling short an equivalent number of upside January $92.50 calls for $1.70 and downside $70 puts for $0.80, with shares at $83.69. Open interest in the long strike was just 2,407 contracts before that session began, showing that these were new positions.

Those January $87.50 calls have sold for as much as $7.80 today, more than 2.5 times their purchase price while the short call leg of the trade is also in-the-money and the puts were last marked for $0.35, implying a net profit of 775% on the trade’s initial capital outlay in total.  The stock rose 12.27% at the same time, underscoring how options can far outperform moves in 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.

SNE was last trading at $81.68, up 5.43%. The Japanese electronics giant’s stock has climbed steadily since reporting earnings in late October.