Traders score with $BG calls

Bunge (BG) is surging to a new 52-Week high today, turning big gains on bullish option positions.

On Dec. 31, Market Rebellion’s Unusual Option Activity Service identified the purchase of 2,000 February $70 calls for $1.70 as part of a bullish spread with shares at $65.38. This represented fresh buying, as volume was well above the strike’s previous open interest of just 63 contracts.

Those calls today have traded for $8.08, more than 4.5 times their purchase price. The stock rose 19.15% in the same time period, showing how options can far outpace gains 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.

BG was last higher by 1.85% at $77.74. Bunge stock has rallied after topping quarterly earnings and guiding its fiscal year earnings above the consensus on Wednesday.