$STZ bulls double their money

Option traders have racked up large profits on upside positions in Constellation Brands (STZ).

On Jan. 15, Investitute’s market scanners flagged the purchase of 5,751 January 2020 $160 calls for $18.10 as part of a bullish spread with shares at $160.94. This was clearly a new position, as open interest in the strike was only 225 contracts before that session began.

Those calls traded for $43.70 today, about 2.5 times their purchase price. The stock rose 24.13% in the same time period, a large move but nowhere near that of its options on a relative basis.

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.

STZ reached a session high of $200 this morning but pulled back with the broader market and is trading at $194 this afternoon, off 1.49% on the day. The alcoholic-beverage company topped earnings and sales estimates late last week.