Traders run up gains in $FDC

Bullish option traders posted large profits in First Data today, thanks to strong quarterly results.

Back on Feb. 13, Investitute’s market scanners identified the purchase of 10,700 July $16 calls for $1.40 to $1.50 with shares at $15.66. This was clearly fresh buying, as open interest in the strike was only 281 contracts before the activity appeared.

Those calls traded for $2.55 today, nearly double their initial price. The stock rose 16.1% in the same time period, illustrating the kind of leverage that can be achieved with options. Investitute co-founder Jon Najarian cited more buying in June calls today on CNBC’s “Halftime Report.”

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.

FDC spiked higher by 18.46% to $18.10 today. The credit-card and e-commerce processing company beat earnings expectations and raised its outlook this morning.