These long calls lock in an entry price investors must pay for the stock and therefore can provide major leverage against the underlying shares. In fact, that's exactly what happened yesterday.
RPC was trading for about $19.46, up almost 7 percent, when the calls changed hands. It continued higher throughout the session and closed 12 percent higher at $20.51.
The calls, however, translated that same move into a gain of 60 percent to 90 percent gain, fetching $1.05 in the afternoon.
Overall option volume was 14 times greater than average yesterday, with calls outnumbering puts by a bullish 27-to-1 ratio.
—Russell has no positions in RES.
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David Russell is a reporter and writer for OptionMonster.
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