$SO calls turn fast profits

Option traders are making fast money on bullish positions in Southern Company (SO) today.

On Jan. 13, Market Rebellion’s tracking systems detected the purchase of 3,962 February $65 calls as part of a bullish combo, selling an equivalent number of downside puts, for $0.70 with shares at $64.04. Volume was above the strike’s previous open interest of 2,492 contracts, indicating that this was fresh buying.

Those calls traded for as much as $3.45 today, nearly 5 times their purchase price. The stock rose 6.54% 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.

SO reached a session and all-time-high of $68.30 earlier but has pulled back to $67.88 this afternoon, up 0.92% on the day. The electric utility was upgraded at KeyBanc on Friday, Jan. 17, to Overweight from Sector Weight.