$RTN call prices rocket 9-fold

It took barely a week for bullish option traders to run up huge profits in Raytheon (RTN).

On Sept. 5, Market Rebellion’s proprietary programs flagged the purchase of 2,000 October $200 calls for $0.87 to $0.95 with shares at $186.04. Open interest in the strike was only 115 contracts before the trades occurred, showing that this was fresh buying.

We updated those calls when they doubled to $1.82 the next day, but they have traded for as much as $7.67 so far today–just shy of 9 times their initial purchase price. The stock rose 9.74% 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.

RTN is up 2.69% to $204.08 this morning. Shares jumped after the defense contractor presented at a Morgan Stanley conference on Sept. 12 and are rallying again today following the attack on a major Saudi oil facility yesterday.