$XRX bulls triple their money

Option traders posted exponential gains in Xerox today, thanks to strong quarterly results.

On Dec. 17, Investitute’s tracking systems showed that 2,600 Weekly $25 calls expiring on April 18 were purchased for $1.01 to $1.04 with shares at $22.52. This was clearly fresh buying, as volume was far above the strike’s previous open interest of 142 contracts.

Those calls traded up to $2.97 today, about 3 times their purchase prices. The stock rose 19.67% 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.

XRX spiked higher by 11.4% today to close at $27.07. The photo-copier and document-management icon topped earnings expectations and issued a strong outlook this morning.