$UNP bulls rack up large gains

Option traders doubled their money in United Pacific today before shares fell with the rest of the market.

On Sept. 5, Investitute’s market scanners found that 3,000 Weekly $152.50 calls expiring this Friday were bought for $3.63 to $3.70 as part of a bullish spread with shares at $153.23. This was clearly a new position, as open interest in the strike was a mere 30 contracts before the trade occurred.

Those calls sold for $8.30 this morning, more than double their purchase prices. The stock rose 4.57% in the same time period, underscoring how options can far outperform 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.

UNP climbed to $162.97 early today before pulling back with the broader market to close at $154.46, down 4.88%. The railroad operator rallied sharply on Sept. 18 after Loop Capital upgraded the stock to “buy” from “hold” and raised its price target to $188 from $153 based on the company’s new operating plan.