$WGO bulls drive away with profits

Winnebago Industries gapped higher this morning, handing exponential gains to upside option traders.

On June 18, Investitute’s market scanners detected the purchase of 1,800 July $45 calls for $0.70, as part of a complex bullish spread, with shares at $40.40. These were clearly new positions, as open interest in the strike was a mere 273 contracts before the trades occurred.

Those option traders may have positioned their buys on their belief that the beaten-down leisure brand would rebound with a strong quarter.

New buyers of those July $45 calls paid as much as $3.10 this morning, more than 4 times their initial purchase price. The stock rose 13.7% 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.

Winnebago jumped 14.8% today to close at $46.35. The recreational vehicle manufacturer reported earnings this morning and beat on both the top and bottom lines.